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What changed in AFFILIATED MANAGERS GROUP, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AFFILIATED MANAGERS GROUP, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+272 added−278 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-17)

Top changes in AFFILIATED MANAGERS GROUP, INC.'s 2023 10-K

272 paragraphs added · 278 removed · 219 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe and Affiliate management, therefore, participate in any increase or decrease in revenue, and only Affiliate management participates in any increase or decrease in expenses. Under these structured partnership interests our contractual share of revenue generally has priority over distributions to Affiliate management.
Biggest changeUnder these structured partnership interests our contractual share of revenue generally has priority over distributions to Affiliate management. 3 Table of Contents Where we share in the Affiliate’s revenue less agreed-upon expenses, we benefit from any increase in revenue or any decrease in the agreed-upon expenses, but also have exposure to any decrease in revenue or any increase in such agreed-upon expenses.
We prioritize employee engagement through a range of cross-functional, multi-level communication and collaboration mediums through both in-person and virtual forums, including small working group lunches, company-wide town halls, management off-sites, and charitable volunteer activities.
We prioritize employee engagement through a range of cross-functional, multi-level communication and collaboration mediums through both in-person and virtual forums, including small working group lunches, company-wide gatherings and town halls, management off-sites, and charitable volunteer activities.
These broker-dealers are also subject to net capital rules in the U.S. that mandate the maintenance of certain levels of capital, and our Affiliates and our global distribution subsidiaries may also be subject to other regulatory capital requirements imposed by non-U.S. regulatory authorities.
These broker-dealers are also subject to net capital rules in the U.S. that mandate the maintenance of certain levels of capital, and our Affiliates and our other distribution subsidiaries may also be subject to other regulatory capital requirements imposed by non-U.S. regulatory authorities.
Item 1. Business AMG is a leading partner to independent investment management firms globally. Our strategy is to generate long-term value by investing in a diverse array of high-quality independent partner-owned firms, referred to as “Affiliates,” through a proven partnership approach, and allocating resources across our unique opportunity set to the areas of highest growth and return.
Item 1. Business AMG is a strategic partner to leading independent investment firms globally. Our strategy is to generate long-term value by investing in a diverse array of high-quality independent partner-owned firms, referred to as “Affiliates,” through a proven partnership approach, and allocating resources across our unique opportunity set to the areas of highest growth and return.
We regularly conduct company-wide surveys to solicit feedback from our employees on a variety of topics, including corporate culture, philanthropic interests, remote working, and general job satisfaction, which help us enhance employee engagement and retention.
We regularly conduct company-wide surveys to solicit feedback from our employees on a variety of topics, including corporate culture, philanthropic interests, and general job satisfaction, which help us to enhance employee engagement and retention.
This subsidiary sponsors mutual funds registered under the Investment Company Act, and serves as an investment adviser and/or administrator for the AMG Funds complex. In the UK, our institutional distribution subsidiary is regulated by the FCA.
This subsidiary sponsors mutual funds registered under the Investment Company Act, and serves as an investment adviser and/or administrator for our fund complex. In the UK, our institutional distribution subsidiary is regulated by the FCA.
Many of our Affiliates also sponsor or advise registered and unregistered funds in the U.S. and in other jurisdictions, and are subject to regulatory requirements in the jurisdictions where those funds are sponsored or offered, including, with respect to mutual funds in the U.S., the Investment Company Act of 1940, as amended (the “Investment Company Act”).
Many of our Affiliates also sponsor or advise registered and unregistered 4 Table of Contents funds in the U.S. and in other jurisdictions, and are subject to regulatory requirements in the jurisdictions where those funds are sponsored or offered, including, with respect to mutual funds in the U.S., the Investment Company Act of 1940, as amended (the “Investment Company Act”).
Through employee participation in our corporate philanthropic initiatives across our global offices, we are committed to giving back to the communities in which we operate, and we believe that these initiatives also support our efforts to attract and retain employees. We provide company-supported time off to encourage employees in their charitable endeavors.
Through employee participation in our corporate philanthropic initiatives across our global offices, we are committed to giving back to the communities in which we work and live, and we believe that these initiatives also support our efforts to attract and retain employees. We provide company-supported time off to encourage employees in their charitable endeavors.
We believe that the most important factors affecting our Affiliates’ ability to compete for clients are the: 3 Tab l e of Contents • investment performance, investment styles, and reputations of our Affiliates and their management teams; • differentiation of our Affiliates’ investment strategies and products and the continued development of investment strategies and products to meet the evolving needs and demands of investors; • depth and continuity of our and our Affiliates’ client relationships and the level of client service offered; • maintenance of strong business relationships by us and our Affiliates with major intermediaries; and • continued success of our and our Affiliates’ distribution efforts.
We believe that the most important factors affecting our Affiliates’ ability to compete for clients are the: • investment performance, investment styles, and reputations of our Affiliates and their management teams; • differentiation of our Affiliates’ investment strategies and products and the continued development of investment strategies and products to meet the evolving needs and demands of investors; • depth and continuity of our and our Affiliates’ client relationships and the level of client service offered; • maintenance of strong business relationships by us and our Affiliates with major intermediaries; and • continued success of our and our Affiliates’ distribution efforts.
Our annual anonymous employee engagement survey reported an employee satisfaction rating of approximately 90% in 2022, which we attribute to our focus and commitment to our employees, our entrepreneurial culture and partnership orientation, and our meaningful involvement with communities surrounding our offices.
Our annual anonymous employee engagement survey reported an employee satisfaction rating of 90% in 2023, which we attribute to our focus and commitment to our employees, our entrepreneurial culture and partnership orientation, and our meaningful involvement with communities surrounding our offices.
We make these reports available through our website as soon as reasonably practicable after our electronic filing of such materials with, or the furnishing of them to, the SEC. The information contained or incorporated on our website is not a part of this Annual Report on Form 10-K. 6 Tab l e of Contents
We make these reports available through our website as soon as reasonably practicable after our electronic filing of such materials with, or the furnishing of them to, the SEC. The information contained or incorporated on our website is not a part of this Annual Report on Form 10-K. 6 Table of Contents
We also have institutional distribution subsidiaries or branches of subsidiaries regulated by the Dubai Financial Services Authority, the Securities and Futures Commission in Hong Kong, and the Australian Securities and Investments Commission, and our activities in the European Union are regulated by various regulators in European jurisdictions.
We also have institutional distribution subsidiaries or branches of subsidiaries regulated by the Dubai Financial Services Authority and the Australian Securities and Investments Commission, and our activities in the European Union are regulated by various regulators in European jurisdictions.
Given this, the following is a discussion of AMG’s workforce, or approximately 250 of the total employees, and the policies and cultural initiatives in respect of our human capital. Our employees and our reputation are our most important assets, and attracting, retaining, and motivating top talent to execute on our strategic business objectives is a fundamental imperative.
Given this, the following is a discussion of AMG’s workforce, or approximately 250 of the total employees, and the policies and cultural initiatives which pertain to our human capital. Our employees and our reputation are our most important assets, and attracting, retaining, and motivating top talent to execute on our strategic business objectives is a fundamental imperative.
Our Affiliates distribute their investment services and products to institutional and wealth clients through direct sales efforts and established relationships with consultants and intermediaries around the world through their own business development capabilities. 2 Tab l e of Contents In addition, AMG supports the long-term growth and client diversification of our Affiliates by operating a distribution platform in which each Affiliate may choose to participate.
Our Affiliates distribute their investment services and products to institutional and wealth clients through direct sales efforts and established relationships with consultants and intermediaries around the world through their own business development capabilities. In addition, AMG supports the long-term growth and client diversification of our Affiliates by operating a distribution platform in which each Affiliate may choose to participate.
Our Partnership Structure and Relationship with Affiliates We maintain long-term partnerships with the management equity owners of our Affiliates, and believe that Affiliate management equity ownership (along with our long-term ownership) aligns our and our Affiliates’ interests, enhances Affiliate management equity incentives, and preserves the opportunity for Affiliate management to participate directly in the long-term future growth and profitability of their firm.
Our Partnership Structure and Relationship with Affiliates We believe that Affiliate management equity ownership in their firms (along with our long-term partnership) aligns our and our Affiliates’ interests, enhances Affiliate management equity incentives, and preserves the opportunity for Affiliate management to participate directly in the long-term future growth and profitability of their firm.
Through our matching program as well as through direct grants, AMG and The AMG Charitable Foundation have made donations to more than 650 organizations around the world to date. We believe diversity and inclusion results in a highly creative and innovative workforce, and are committed to fostering and promoting an inclusive and diverse work environment.
Through our matching program as well as through direct grants, AMG and The AMG Charitable Foundation have made donations to more than 800 organizations around the world to date. We believe that organizational diversity results in a highly creative and innovative workforce, and are committed to fostering and promoting an inclusive and diverse work environment.
Instead, our share of earnings or losses, net of amortization and impairments, is included in Equity method income (loss) (net) in our Consolidated Statements of Income, and our interest in these Affiliates is reported in Equity method investments in Affiliates (net) in our Consolidated Balance Sheets.
Instead, our share of earnings or losses, net of amortization and impairments, is included in Equity method income (net) in our Consolidated Statements of Income, and our interest in these Affiliates is recorded in Equity method investments in Affiliates (net) in our Consolidated Balance Sheets.
Independent firms seeking an institutional partner are attracted to our unique partnership approach and our global reputation and track record across three decades as a successful strategic partner to independent investment firms around the world. We anticipate that the principal owners of independent investment firms will continue to seek access to an evolving range of growth and succession solutions.
Independent firms seeking an institutional partner are attracted to our unique partnership approach and our global reputation as a successful strategic partner to independent investment firms around the world. We anticipate that the principal owners of independent investment firms will continue to seek access to an evolving range of growth and succession solutions.
We are well-positioned to execute upon these investment opportunities through our: • established process of identifying and cultivating high-quality prospective Affiliates; • broad industry network and proprietary relationships developed with prospects over many years; • substantial experience and expertise in structuring and negotiating transactions; • global reputation as an outstanding partner to our Affiliates, as well as for providing innovative solutions for the strategic needs of independent investment firms; and • successful engagement with our Affiliates to enhance their long-term prospects, including through new product development, distribution, and other business development initiatives.
We are well-positioned to execute upon these investment opportunities through our: • established process of identifying and cultivating high-quality prospective Affiliates; • broad industry network and proprietary relationships developed with prospects over many years; • substantial experience and expertise in structuring and negotiating transactions; • global reputation as an excellent partner to our Affiliates, having provided innovative solutions for the strategic needs of independent investment firms across three decades; and • successful engagement with our Affiliates to enhance their long-term prospects, including through product development, distribution, and other business development initiatives.
We believe that clients recognize these fundamental characteristics of partner-owned firms, as well as the 1 Tab l e of Contents alignment created by direct equity ownership by firm principals, as competitive advantages for firms in achieving client investment goals and objectives. Our investment approach preserves these essential elements of our Affiliates’ success.
We believe that clients recognize these fundamental characteristics of partner-owned firms, as well as the alignment created by direct equity ownership by firm principals, as competitive advantages in achieving client investment goals and objectives. Our investment approach preserves these essential elements of our Affiliates’ success.
Human Capital Management As of December 31, 2022, we and our Affiliates had approximately 3,950 employees, the substantial majority of which were employed by our Affiliates and not by AMG. Each Affiliate’s management team retains operational autonomy in managing and operating their business on a day-to-day basis, including with respect to their human capital.
Human Capital Management As of December 31, 2023, we and our Affiliates had approximately 4,000 employees, the substantial majority of which were employed by our Affiliates and not by AMG. Each Affiliate’s management team retains autonomy in managing and operating their business on a day-to-day basis, including with respect to their human capital.
As of December 31, 2022, our Affiliates managed approximately $651 billion across a range of investment styles and geographies, in equity, alternative, and multi-asset and fixed income strategies, as the following chart illustrates. Assets Under Management Our Affiliates currently manage assets for investors in more than 50 countries, including all major developed markets.
As of December 31, 2023, our Affiliates managed approximately $673 billion across a broad range of investment styles and geographies, in alternative, equity, and multi-asset and fixed income strategies, as the following chart illustrates. 2 Table of Contents Assets Under Management Our Affiliates currently manage assets for investors in more than 50 countries, including all major developed markets.
We also provide succession planning solutions and advice to many of our Affiliates, which can include a degree of liquidity and financial diversification along with incentive alignment for next-generation partners. Our innovative partnership approach enhances our Affiliates’ ability to achieve their long-term strategic objectives while maintaining their unique entrepreneurial cultures, investment independence, and operational autonomy in managing their businesses.
We also provide succession planning solutions and advice to many of our Affiliates, which can include a degree of liquidity and financial diversification along with incentive alignment for next-generation partners. 1 Table of Contents Our innovative partnership approach enhances our Affiliates’ ability to achieve their long-term strategic objectives while maintaining their independence and autonomy, and therefore, their unique entrepreneurial and investment-centric cultures.
From time to time, we may restructure our interest in an Affiliate to better support the Affiliate’s growth strategy, and if doing so is in the best interest of the Affiliate’s business, management partners, and clients, as well as our stakeholders. Competition Our Affiliates compete with numerous investment management firms globally, as well as with subsidiaries of larger financial organizations.
From time to time, we may restructure our interest in an Affiliate to better support the Affiliate’s growth strategy, but only if doing so is in the best interest of the Affiliate’s business, management partners, and clients, as well as our stakeholders.
The operating agreement also reflects the specific terms of our economic participation in the Affiliate, which, in each case, uses a “structured partnership interest” to ensure alignment of our economic interests with those of Affiliate management. For a majority of our Affiliates, we use structured partnership interests in which we contractually share in the Affiliate’s revenue without regard to expenses.
The operating agreement also reflects the specific terms of our economic participation in the Affiliate, which, in each case, uses a “structured partnership interest” to ensure alignment of our economic interests with those of Affiliate management.
In this type of structured partnership interest, the Affiliate allocates a specified percentage of its revenue to us and Affiliate management, while using the remainder of its revenue for operating expenses and for additional distributions to Affiliate management.
Where we share in the Affiliate’s revenue without regard to expenses, the Affiliate allocates a specified percentage of its revenue to us and Affiliate management, while using the remainder for operating expenses and additional distributions to Affiliate management.
Our Website Our website is www.amg.com . Our website provides information about us, and, from time to time, we may use it to distribute material company information. We routinely post financial, investment performance, and other important information regarding the Company in the Investor Relations section of our website and we encourage investors to consult that section regularly.
We routinely post financial, investment performance, and other important information regarding the Company in the Investor Relations section of our website and we encourage investors to consult that section regularly.
Department of Labor (“DOL”) administers ERISA and regulates investment advisers who service retirement plan clients, and has been increasingly active in proposing and adopting additional regulations applicable to the investment management industry.
Department of Labor administers ERISA and regulates investment advisers who service retirement plan clients, and has been increasingly active in proposing and adopting additional regulations applicable to the investment management industry. Certain of our Affiliates and our U.S. wealth distribution subsidiary are also members of the National Futures Association and are regulated by the U.S.
Certain Affiliates offer their investment management services to the same client types and, from time to time, may compete with each other for clients. In addition, there are relatively few barriers to entry for new investment management firms, especially for those providing investment management services to institutional and high net worth investors.
In addition, there are relatively few barriers to entry for new investment management firms, especially for those providing investment management services to institutional and high net worth investors.
As of December 31, 2022, our aggregate assets under management were approximately $651 billion across a broad range of differentiated investment strategies.
As of December 31, 2023, our aggregate assets under management were approximately $673 billion across a diverse range of private markets, liquid alternative, and differentiated long-only investment strategies.
Certain of our Affiliates and our U.S. wealth distribution subsidiary are also members of the National 4 Tab l e of Contents Futures Association and are regulated by the U.S. Commodity Futures Trading Commission (“CFTC”) with respect to the management of funds and other products that utilize futures, swaps or other CFTC-regulated instruments.
Commodity Futures Trading Commission (“CFTC”) with respect to the management of funds and other products that utilize futures, swaps or other CFTC-regulated instruments. In addition, certain of our Affiliates and our U.S. wealth broker-dealer subsidiary are registered broker-dealers and members of the Financial Industry Regulatory Authority (“FINRA”), for the purpose of distributing funds or other products.
FINRA and the SEC have the authority to conduct periodic examinations of member broker-dealers, and may also conduct administrative proceedings.
FINRA has adopted extensive regulatory requirements relating to sales practices, registration of personnel, compliance and supervision, and compensation and disclosure. FINRA and the SEC have the authority to conduct periodic examinations of member broker-dealers, and may also conduct administrative proceedings.
We continually seek to enhance the diversity of our employee base, as our employees around the world contribute their distinct perspectives to improve our business and the communities in which our businesses operate. Our executive management team has responsibility for diversity initiatives, in coordination with our Sustainability Committee, and reviews these initiatives with our Board of Directors at least annually.
In addition, two of our three Board committees are chaired by women. We continually seek to enhance the diversity of our employee base, as our employees around the world contribute their distinct perspectives to improve our business and the communities in which our businesses operate.
These firms may have significantly greater financial, technological, and marketing resources; access to captive distribution; and assets under management. Many of these firms offer an even broader array of products and services that our Affiliates may not, in particular investment strategies such as passively-managed products, including exchange traded funds, which typically carry lower fee rates.
Many of these firms may offer products and services that our Affiliates may not, in particular investment strategies such as passively-managed products, including exchange traded funds, which typically carry lower fee rates. Certain Affiliates offer their investment management services to the same client types and, from time to time, may compete with each other for clients.
Our leadership training and sponsored skills development programs cover a wide range of subject area expertise as well as career development generally, and are anchored on a comprehensive performance review process, which includes a company-wide 360-degree review program.
We support that imperative through our strong values-based culture, commitment to career development and training, employee engagement initiatives, attractive compensation and benefits programs, attention to succession planning, and fostering of organizational diversity at all levels of our organization. 5 Table of Contents Our leadership training and sponsored skills development programs cover a wide range of subject area expertise as well as career development generally, and are anchored on a comprehensive performance review process, which includes a company-wide 360-degree review program.
Further, three of seven (43%) independent members of our Board of Directors are women, and two of 5 Tab l e of Contents seven (29%) independent directors are ethnically diverse, in each case, above the average of S&P 500 companies. In addition, two of our three Board committees are chaired by women.
We have achieved gender diversity of 38% across management positions in our workforce, and nearly half (47%) of our employees are women. Further, three of eight (38%) independent members of our Board of Directors are women, and two of eight (25%) independent directors are ethnically diverse, in each case, above the average of S&P 500 companies.
Removed
Our innovative partnership approach enables each Affiliate’s management team to own significant equity in their firm while maintaining operational and investment autonomy. In addition, we offer our Affiliates growth capital, distribution, and other strategic value-added capabilities, which enhance the long-term growth of these independent businesses, and enable them to align equity incentives across generations of principals to build enduring franchises.
Added
With their entrepreneurial, investment-centric cultures and alignment of interests with clients through direct equity ownership by firm principals, independent firms have fundamental competitive advantages in offering unique return streams to the marketplace. Through AMG’s distinctive approach, we enhance these advantages to magnify the long-term success of our Affiliates and actively support their independence.
Removed
For other Affiliates, we use structured partnership interests in which we contractually share in the Affiliate’s revenue less agreed-upon expenses. This type of partnership interest allows us to benefit from any increase in revenue or any decrease in the agreed-upon expenses, but also exposes us to any decrease in revenue or any increase in such agreed-upon expenses.
Added
Our innovative model enables each Affiliate’s management team to retain autonomy and significant equity ownership in their firm, while they leverage our strategic capabilities and insight, including growth capital, product strategy and development, capital formation, and incentive alignment and succession planning.
Removed
In addition, certain of our Affiliates and our U.S. wealth broker-dealer subsidiary are registered broker-dealers and members of the Financial Industry Regulatory Authority (“FINRA”), for the purpose of distributing funds or other products. FINRA has adopted extensive regulatory requirements relating to sales practices, registration of personnel, compliance and supervision, and compensation and disclosure.
Added
With meaningful earnings contributions from each of private markets, liquid alternatives, and differentiated long-only strategies (which includes global equities, U.S. equities, and multi-asset and fixed income strategies), AMG’s business profile is highly diversified.
Removed
We support that imperative through our strong values-based culture, commitment to career development and training, employee engagement, attractive compensation and benefits programs, attention to succession planning, and fostering of diversity and inclusion at all levels of our organization.
Added
The form of our structured partnership interests in our Affiliates differs from Affiliate to Affiliate and ranges from structures where we contractually share in the Affiliate’s revenue without regard to expenses, comprising Affiliates that contribute a majority of our Consolidated revenue, to others where we contractually share in the Affiliate’s revenue less agreed-upon expenses.
Removed
We have achieved gender diversity of 37% across management positions in our workforce, and nearly half (47%) of our employees are women (as compared to 32% and 44%, respectively, in the prior period, inclusive of all business units).
Added
Further, the structure at a particular Affiliate, or the expenses that we agree to share in, may change during the course of our investment.
Added
We and Affiliate management, therefore, participate in any increase or decrease in revenue, and only Affiliate management participates in any increase or decrease in expenses.
Added
Competition Our Affiliates compete with numerous investment management firms globally, as well as with subsidiaries of larger financial organizations. These firms may have significantly greater financial, technological, and marketing resources; access to captive distribution; and assets under management.
Added
Our executive management team has responsibility for diversity initiatives, in coordination with our Sustainability Committee, and reviews these initiatives with our Board of Directors at least annually. Our Website Our website is www.amg.com . Our website provides information about us, and, from time to time, we may use it to distribute material company information.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur and our Affiliates’ reputations are critical to our business and could be impacted by events that may be difficult or impossible to control, and costly or impossible to remediate, including alleged or actual failures by us, our Affiliates or our respective employees to comply with applicable laws, rules or regulations, errors in our public reports, fund liquidity or valuation issues including with respect to illiquid assets within private markets funds of certain of our Affiliates, cyber-attack or data breach incidents, or any threatened or actual litigation against us, any of our Affiliates or our respective employees, or a perceived or actual conflict between us and any of our Affiliates or among our Affiliates.
Biggest changeOur and our Affiliates’ reputations are critical to our business and could be impacted by events that may be difficult or impossible to control, and costly or impossible to remediate, including: • alleged or actual failures by us, our Affiliates or our respective employees to comply with applicable laws, rules or regulations; • errors in our public reports; • cyber-attack or data breach incidents; • fund liquidity or valuation issues including with respect to non-traded, illiquid assets within funds or products of certain of our Affiliates; • threatened or actual litigation against us, any of our Affiliates or our respective employees; • perceived or actual conflict between us and any of our Affiliates or among our Affiliates; • negative perceptions of our or certain of our Affiliates’ investments or business practices by stakeholder groups who have increasingly expressed divergent views on a range of environmental, social, and governance (“ESG”) matters; or • other events and factors that are difficult to predict including those that could impact our Affiliates’ ability to compete effectively with other firms, our ability to successfully pursue our growth strategy, and other risks described elsewhere in this “Risk Factors” section.
Our Affiliates’ ability to maintain current fee levels depends on a number of factors, including our Affiliates’ investment performance, as well as competition and trends in the investment management industry, such as investor demand for passively-managed products, including exchange traded funds, that typically carry lower fee rates, or preferences for other developing strategies or trends.
Our Affiliates’ ability to maintain current fee levels depends on a number of factors, including our Affiliates’ investment performance, as well as competition and trends in the investment management industry, such as investor demand for passively-managed products, including index and exchange traded funds, that typically carry lower fee rates, or preferences for other developing strategies or trends.
We and our Affiliates, as well as our respective service providers, are also subject to the risk that employees or contractors, or other third parties, may deliberately seek to circumvent established controls to commit fraud or act in ways that are inconsistent with our or their controls, policies, and procedures, and which may be harder to monitor in remote work environments.
We and our Affiliates, as well as our respective third-party service providers, are also subject to the risk that employees or contractors, or other third parties, may deliberately seek to circumvent established controls to commit fraud or act in ways that are inconsistent with our or their controls, policies, and procedures, and which may be harder to monitor in remote work environments.
Any such transactions or changes, or disputes in relation to such transactions or changes which do not resolve in our favor, could have an adverse impact on our financial condition and results of operations. We and our Affiliates rely on certain key personnel and cannot guarantee their continued service.
Any such transactions or changes, or disputes in relation to such transactions or changes which do not resolve in our favor, could have an adverse impact on our reputation, financial condition, and results of operations. We and our Affiliates rely on certain key personnel and cannot guarantee their continued service.
We generally do not have employment agreements with our executive officers, although each has a significant deferred equity interest in the Company and is subject to non-solicitation and non-competition restrictions that may be triggered upon their departure.
We do not have employment agreements with our executive officers, although each has a significant deferred equity interest in the Company and is subject to non-solicitation and non-competition restrictions that may be triggered upon their departure.
These regulatory developments could adversely affect our and our Affiliates’ businesses, increase compliance costs, require that we or our Affiliates change or curtail operations or investment offerings, or impact our and our Affiliates’ access to capital and the market for our common stock.
These and other regulatory developments could adversely affect our and our Affiliates’ businesses, increase compliance costs, require that we or our Affiliates change or curtail operations or investment offerings, or impact our and our Affiliates’ access to capital and the market for our common stock.
Additionally, although we and our Affiliates have systems and practices in place to monitor third-party service providers, such third parties are subject to similar risks.
Additionally, although we and our Affiliates have systems and practices in place to monitor our respective third-party service providers, such third parties are subject to similar risks.
In recent periods, we have recorded expenses to reduce the carrying value to fair value of certain Affiliates and certain acquired client relationships, and may experience similar impairment events in future reporting periods. See “Critical Accounting Estimates and Judgments” in Item 7 and Notes 9 and 10 of the Consolidated Financial Statements.
In recent periods, we have recorded expenses to reduce the carrying value to fair value of certain Affiliates and certain acquired client relationships, and may experience similar impairment events in future reporting periods. See “Critical Accounting Estimates and Judgments” in Item 7 and Notes 8 and 9 of the Consolidated Financial Statements.
As a consequence, our financial condition and results of operations may be adversely affected by problems stemming from the day-to-day operations of our Affiliates that we are not involved in, and where weaknesses or failures in internal processes or systems, legal or regulatory matters, or other operational challenges could lead to a disruption or cessation of our Affiliates’ operations, liability to their clients, exposure to claims or disciplinary action, or reputational harm.
As 15 Table of Contents a consequence, our financial condition and results of operations may be adversely affected by problems stemming from the day-to-day operations of our Affiliates that we are not involved in, and where weaknesses or failures in internal processes or systems, legal or regulatory matters, or other operational challenges could lead to a disruption or cessation of our Affiliates’ operations, liability to their clients, exposure to claims or disciplinary action, or reputational harm.
In connection with our financing activities, we have issued junior convertible trust preferred securities and entered into an equity distribution program, either of which may result in the issuance of our common stock upon the occurrence of certain events. We also have outstanding option and restricted stock awards that have been granted under our share-based incentive plans.
In connection with our financing activities, we have issued junior convertible trust preferred securities and maintain an equity distribution program, either of which may result in the issuance of our common stock upon the occurrence of certain events. We also have outstanding option and restricted stock awards that have been granted under our share-based incentive plans.
Further, we and our Affiliates rely on third parties for certain aspects of our respective businesses, including financial intermediaries, providers of technology infrastructure, and other service providers such as broker-dealers, custodians, administrators and other agents, as well as accounting, legal, and other professional advisors, and these parties are susceptible to similar risks.
Further, we and our Affiliates rely on third parties for certain aspects of our respective businesses, including financial intermediaries, providers of 16 Table of Contents technology infrastructure, and other service providers such as broker-dealers, custodians, administrators and other agents, as well as accounting, legal, and other professional advisors, and these parties are susceptible to similar risks.
Further, if we, any of our Affiliates or our respective employees were to fail to comply with applicable laws, rules, or regulations, or be named as a subject of an investigation or other regulatory action, the public announcement and potential publicity surrounding any such investigation or action could have an adverse effect on our or our Affiliates’ reputations and on our stock price and result in increased costs, even if we, our Affiliates, or our respective employees were found not to have violated such laws, rules or regulations.
Further, if we, any of our Affiliates or our respective employees or third-party service providers were to fail to comply with applicable laws, rules, or regulations, or be named as a subject of an investigation or other regulatory action, the public announcement and potential publicity surrounding any such investigation or action could have an adverse effect on our or our Affiliates’ reputations and on our stock price and result in increased costs, even if we, our Affiliates, or our respective employees or third-party service providers were found not to have violated such laws, rules or regulations.
For example, the EU’s Sustainable Finance Disclosure Regulation (“SFDR”) 13 Tab l e of Contents requires MiFID firms and AIFMs to take ESG factors into account in their organizational, risk and governance arrangements and are designed to, among other things, establish EU labels for green financial products, clarify managers’ duties regarding sustainability in their investment decisions, and increase disclosure requirements relating to ESG matters including those relating to “greenwashing” (i.e., the holding out of a product as having green or sustainable characteristics where this is not, in fact, the case).
For example, the EU’s Sustainable Finance Disclosure Regulation requires MiFID firms and AIFMs to take ESG factors into account in their organizational, risk and governance arrangements and are designed to, among other things, establish EU labels for green financial products, clarify managers’ duties regarding sustainability in their investment decisions, and increase disclosure requirements relating to ESG matters including those relating to “greenwashing” (i.e., the holding out of a product as having green or sustainable characteristics where this is not, in fact, the case).
Additionally, regardless of the particular structure, we may elect to defer or forgo the receipt of our share of an Affiliate’s revenue or earnings, or to adjust any expenses allocated to us, to permit the Affiliate to fund expenses in light of unanticipated changes in revenue or operating expenses, with the aim of maximizing the long-term benefits for us and the Affiliate.
Additionally, regardless of the particular structure, we may agree to change the structure, or may elect to defer or forgo the receipt of our share of an Affiliate’s revenue or earnings, or adjust expenses allocated to us, to permit the Affiliate to fund expenses in light of unanticipated changes in revenue or operating expenses, with the aim of maximizing the long-term benefits for us and the Affiliate.
In addition, as a result of operating internationally, certain of our Affiliates and our global distribution subsidiaries are subject to requirements under foreign regulations to maintain minimum levels of capital.
In addition, as a result of operating internationally, certain of our Affiliates and our global capital distribution platform are subject to requirements under foreign regulations to maintain minimum levels of capital.
Any changes to federal, state or foreign tax laws, regulations, accounting standards or administrative practices, or the release of additional guidance, interpretations or other information, could impact our estimated effective tax rate and overall tax expense, as well as our earnings estimates, and could result in adjustments to our treatment of deferred taxes, including the realization or value thereof, or in unanticipated additional tax liabilities, any of which could have an adverse effect on our business, financial condition, and results of operations.
Any changes to federal, state or foreign tax laws, regulations, accounting standards or administrative practices, or the release of additional guidance, interpretations or other information, including in connection with Pillar Two or otherwise, could impact our estimated effective tax rate and overall tax expense, as well as our earnings estimates, and could result in adjustments to our treatment of deferred taxes, including the realization or value thereof, or in unanticipated additional tax liabilities, any of which could have an adverse effect on our business, financial condition, and results of operations.
Our and our Affiliates’ international operations are subject to foreign risks, including political, regulatory, economic, and currency risks. We and certain of our Affiliates conduct business outside the U.S., and a number of our Affiliates are based outside the U.S. and, accordingly, are subject to risks inherent in doing business internationally.
Our and our Affiliates’ international operations are subject to foreign risks, including political, regulatory, economic, and currency risks. We and certain of our Affiliates conduct business outside the U.S., and a number of our Affiliates are based or have offices outside the U.S. and, accordingly, are subject to risks inherent in doing business internationally.
These risks may include difficulties in staffing and managing foreign operations, longer payment cycles, difficulties in collecting investment advisory fees receivable, different (and in some cases less stringent) legal, regulatory and accounting regimes, political instability, exposure to fluctuations in currency exchange rates, expatriation controls, expropriation risks, and potential adverse tax consequences.
These risks may include difficulties in staffing and managing foreign operations, longer payment cycles, difficulties in collecting investment advisory fees receivable, different (and in some cases less stringent) legal, regulatory and accounting regimes, political instability, 14 Table of Contents exposure to fluctuations in currency exchange rates, expatriation controls, expropriation risks, and potential adverse tax consequences.
Further, certain of our Affiliates operate regulated businesses in jurisdictions outside of the U.S. that, in some cases, require regulatory notifications and other filings if a single stockholder acquires an ownership position in the Company exceeding certain specified thresholds, regardless of whether a change in control has occurred for purposes of the 12 Tab l e of Contents Advisers Act or the Investment Company Act.
Further, certain of our Affiliates operate regulated businesses in jurisdictions outside of the U.S. that, in some cases, require regulatory notifications and other filings if a single stockholder acquires an ownership position in the Company exceeding certain specified thresholds, regardless of whether a change in control has occurred for purposes of the Advisers Act or the Investment Company Act.
If our or our Affiliates’ risk frameworks are ineffective, either because of a failure to keep pace with changes in the financial markets, regulatory requirements, our or our Affiliates’ businesses, counterparties, clients, or service providers, or for other reasons, we or our Affiliates could incur losses, suffer reputational damage, or be out of compliance with applicable regulatory or contractual mandates or expectations.
If our or our Affiliates’ risk frameworks are ineffective, either because of a failure to keep pace with changes in the financial markets, technological advancements, or regulatory requirements, our or our Affiliates’ businesses, counterparties, clients, or respective third-party service providers, or for other reasons, we or our Affiliates could incur losses, suffer reputational damage, or be out of compliance with applicable regulatory or contractual mandates or expectations.
In addition, certain of our Affiliates accounted for under the equity method have customary rights in certain circumstances to restructure or sell their interests in their firm to a third-party, which could be through a direct majority or minority sale transaction, a private or public offering, or otherwise, and to cause us to participate in such restructuring or sale, which could be on terms that we view as less favorable than an alternative transaction or to retaining our interest.
In addition, certain of our Affiliates have customary rights in certain circumstances to restructure or sell their interests in their firm to a third-party, which could be through a direct majority or minority sale transaction, a private or public offering, or otherwise, and to cause us to participate in such restructuring or sale, which could be on terms that we view as less favorable than an alternative transaction or to retaining our interest.
Additionally, given our business model of providing our Affiliates with operational autonomy in managing their businesses, we do not control, and may have limited involvement in, the design, oversight, and maintenance of their technology systems and networks, as well as in the identification of or response to any cyber-attacks, data breaches, or other incidents.
Additionally, given our business model of providing our Affiliates with autonomy in managing their businesses, we do not control, and may have limited involvement in, the design, oversight, and maintenance of their technology systems and networks, as well as in the identification of or response to any cyber-attacks, data breaches, or other incidents. See “Cybersecurity” in Item 1C.
We have substantial intangibles on our balance sheet, and any impairment of our intangibles could adversely affect our financial condition and results of operations. As of December 31, 2022, our total assets were $8.9 billion, of which $4.5 billion were intangibles, and $2.1 billion were equity method investments in Affiliates, an amount primarily composed of intangible assets.
We have substantial intangibles on our balance sheet, and any impairment of our intangibles could adversely affect our financial condition and results of operations. As of December 31, 2023, our total assets were $9.1 billion, of which $4.3 billion were intangibles, and $2.3 billion were equity method investments in Affiliates, an amount primarily composed of intangible assets.
Further, while hedging arrangements may reduce certain risks, such arrangements themselves may entail other risks, may generate significant transaction costs, and may require the posting of cash collateral.
Further, while hedging arrangements may reduce certain risks, such arrangements themselves may entail other risks, may generate significant 10 Table of Contents transaction costs, and may require the posting of cash collateral.
These firms may have significantly greater financial, technological, and marketing resources, captive distribution and assets under management, and many of these firms offer an even broader array of products and services that our Affiliates may not in particular investment strategies.
These firms may have significantly greater financial, technological, and marketing resources, captive distribution and assets under management, and many of these firms may offer products and services that our Affiliates may not in particular investment strategies.
Further, given our long-term innovative partnership approach with our Affiliates, which is designed to maintain their unique entrepreneurial cultures, investment independence, and operational autonomy in managing their businesses, a change in control may be viewed negatively by our Affiliates, impacting their relationships with us.
Further, given our long-term innovative partnership approach with our Affiliates, which is designed to maintain their independence and autonomy, and, therefore, their unique entrepreneurial and investment-centric cultures, a change in control may be viewed negatively by our Affiliates, impacting their relationships with us.
Further, our innovative partnership approach with our Affiliates is designed to enhance our Affiliates’ ability to achieve their long-term strategic objectives, while preserving their unique entrepreneurial cultures, investment independence, and operational autonomy in managing their businesses, and the management of some target firms may prefer terms and structures offered by our competitors.
Further, our innovative partnership approach with our Affiliates is designed to enhance our Affiliates’ ability to achieve their long-term strategic objectives, while preserving their independence and autonomy, and, therefore, their unique entrepreneurial and investment-centric cultures, and the management of some target firms may prefer terms and structures offered by our competitors.
In addition, announcements of our financial and operating results or other material information, including changes in net client cash flows and assets under management, changes in our financial guidance or our failure to meet such guidance, our new investments activity, changes in general conditions in the economy or the financial markets, perceptions regarding our ESG profile, and other developments affecting us, our Affiliates or our competitors, as well as geopolitical, social, regulatory, capital markets, economic, pandemics, and other factors unrelated to us, could cause the market price of our common stock to fluctuate substantially.
In addition, announcements of our financial and operating results or other material information, including changes in net client cash flows and assets under management, announcements and activity regarding our share repurchase programs, changes in our financial guidance or our failure to meet such guidance, our new investments activity, changes in general conditions in the economy or the financial markets, perceptions regarding our ESG profile or sustainable investment decisions of our Affiliates, and other developments affecting us, our Affiliates or our competitors, as well as geopolitical, social, regulatory, capital markets, economic, public health, and other factors unrelated to us, could cause the market price of our common stock to fluctuate substantially.
Further, we also conduct distribution, sales, and marketing activities through our U.S. wealth distribution subsidiary and our global distribution subsidiaries, to extend the reach of our Affiliates’ own business development efforts, and any liability arising in connection with these activities, whether as a result of our own actions or the actions of our participating Affiliates, could result in direct liability to us.
Further, we also conduct distribution, sales, and marketing activities through our U.S. wealth and global distribution platforms to extend the reach of our Affiliates’ own business development efforts, and any liability arising in connection with these activities, whether as a result of our own actions or the actions of our participating Affiliates or third-party service providers, could result in direct liability to us.
Further, the use of derivative financial instruments does not entirely eliminate the possibility of 9 Tab l e of Contents fluctuations in the value of the underlying position or prevent losses if the value of the position declines, and also can limit the opportunity for gain if the value of the position increases.
Further, the use of derivative financial instruments does not entirely eliminate the possibility of fluctuations in the value of the underlying position or prevent losses if the value of the position declines, and also can limit the opportunity for gain if the value of the position increases.
Cash management transactions, capital markets financings, and certain investments or other transactions may create exposure for us or our Affiliates to changes in interest rates, foreign currency exchange rates, marketable securities, and markets, which we or our Affiliates may seek to offset by entering into derivative financial instruments. See Note 7 of the Consolidated Financial Statements.
Cash management transactions, capital markets financings, and certain investments or other transactions may create exposure for us or our Affiliates to changes in interest rates, foreign currency exchange rates, marketable securities, and financial markets generally, which we or our Affiliates may seek to offset by entering into derivative financial instruments.
Item 1A. Risk Factors We and our Affiliates face a variety of risks that are substantial and inherent in our businesses. The following are some of the more important factors that could affect our and our Affiliates’ businesses. Certain statements in “Risk Factors” are forward-looking statements.
Item 1A. Risk Factors We and our Affiliates face a variety of risks that are substantial and inherent in our businesses. The following are some of the more important factors that could affect our and our Affiliates’ businesses.
In addition, our access to additional capital, and the cost of capital we are able to access, is influenced by a number of factors, including the state of global credit and equity markets, interest rates, credit spreads and our credit ratings. We are rated A3 by Moody’s Investors Service and BBB+ by S&P Global Ratings.
In addition, our access to additional capital, and the cost of capital we are able to access, is influenced by a number of factors, including the state of global credit and equity markets, interest rates, credit spreads and our credit ratings.
Although we use a combination of economic incentives, transfer restrictions and, in some instances, non-solicitation, non-competition, and employment agreements in an effort to retain key Affiliate personnel, there is no guarantee that these principals will remain with their firms.
Although we use a combination of economic incentives, transfer restrictions and, in some instances, non-solicitation, non-competition, and 12 Table of Contents employment agreements in an effort to retain key Affiliate personnel, there is no guarantee that these principals will remain with their firms or refrain from competing with us if they depart their firms.
Since certain of our Affiliates contribute more significantly to our revenue than other Affiliates, the loss of key personnel at these Affiliates could have a disproportionately adverse impact on our business, financial condition and results of operations.
Since certain of our Affiliates contribute more significantly to our results than other Affiliates, the loss of key personnel at these Affiliates could have a disproportionately adverse impact on our business, financial condition, and results of operations. RISKS RELATED TO OUR COMMON STOCK Equity markets and our common stock have been volatile.
Further, although we and our Affiliates have systems and practices in place to monitor the third parties on whom we and our Affiliates rely, such third parties, including those providing cloud-based network services, may have similar vulnerabilities and may lack the necessary 15 Tab l e of Contents infrastructure or resources, or may otherwise fail, to adequately protect against or respond to any cyber-attacks, data breaches, or other incidents.
Further, third parties on whom we and our Affiliates rely, including those providing cloud-based network services, may have similar vulnerabilities and may lack the necessary infrastructure or resources, or may otherwise fail, to adequately protect against or respond to any cyber-attacks, data breaches, or other incidents.
In these types of structures, while our distributions generally have priority, our agreed allocations may not anticipate changes in the revenue and operating expense base of the Affiliate, and the revenue remaining after our specified share is allocated to us may not be large enough to cover all of the Affiliate’s operating expenses, which could result in a reduction of the amount allocated to us or could negatively impact the Affiliate’s operations and prospects.
In these types of structures, while our distributions generally have priority, our agreed allocations may not anticipate changes in the revenue and operating expense base of the Affiliate, and the revenue remaining after our specified share is allocated to us may not be large enough to cover all of the Affiliate’s operating expenses, which could result in a reduction of the amount allocated to us or could negatively impact the Affiliate’s operations and prospects. 11 Table of Contents Where we share in the Affiliate’s revenue less agreed-upon expenses, we benefit from any increase in revenue or any decrease in the agreed-upon expenses, but also have exposure to any decrease in revenue or any increase in such expenses.
The structure of our partnership interests in our Affiliates may expose us to unanticipated changes in Affiliate revenue, operating expenses, and other commitments, which we may not anticipate and may have limited ability to control. For a majority of our Affiliates, we use structured partnership interests in which we contractually share in the Affiliate’s revenue without regard to expenses.
The structure of our partnership interests in our Affiliates may expose us to unanticipated changes in Affiliate revenue, operating expenses, and other commitments, which we may not anticipate and may have limited ability to control.
Although we and our Affiliates take protective measures and endeavor to modify them as circumstances warrant, computer systems, software, internal and cloud-based networks, and mobile devices may be vulnerable to cyber-attacks, data privacy or security breaches, phishing schemes and related fraud attempts, ransomware, social engineering, unauthorized access, theft, misuse, computer viruses, or other malicious code and other events that could have a security impact.
Our computer systems, software, internal and cloud-based networks, and mobile devices are vulnerable to cyber-attacks, data privacy or security breaches, phishing schemes and related fraud attempts, ransomware, social engineering, unauthorized access, theft, misuse, computer viruses, or other malicious code and other events that could have a security impact.
Thus, we may need to raise capital through additional borrowings or by selling shares of our common stock or other equity or debt securities, or otherwise refinance a portion of these obligations. As of December 31, 2022, we had outstanding debt of $2.6 billion. Our level of indebtedness may increase if we fund future investments or other expenses through borrowings.
Thus, we may need to raise capital through additional borrowings or by selling shares of our common stock or other equity or debt securities, or otherwise refinance a portion of these obligations. 9 Table of Contents As of December 31, 2023, we had outstanding debt of $2.6 billion.
The success of our business depends on earning and maintaining the trust and confidence of our Affiliates and our stockholders, our ability to compete for future investment opportunities, and our and our Affiliates’ reputations among existing and potential clients.
If our or our Affiliates’ reputations are harmed, we could suffer losses in our business and financial results. The success of our business depends on earning and maintaining the trust and confidence of our Affiliates and our stockholders, our ability to compete for future investment opportunities, and our and our Affiliates’ reputations among existing and potential clients.
RISKS RELATED TO OUR COMMON STOCK Equity markets and our common stock have been volatile. 11 Tab l e of Contents The market price of our common stock has experienced and may continue to experience volatility, and the broader equity markets have experienced and may continue to experience significant price and volume fluctuations.
The market price of our common stock has experienced and may continue to experience volatility, and the broader equity markets have experienced and may continue to experience significant price and volume fluctuations.
As of December 31, 2022, the current redemption value relating to Affiliate equity interests was $489.9 million, of which $465.4 million was presented within Redeemable non-controlling interests (including $20.1 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors), and $24.5 million was presented as Other liabilities.
As of December 31, 2023, the current redemption value relating to Affiliate equity interests was $447.3 million, of which $393.4 million was presented as Redeemable non-controlling interests (including $11.8 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors), and $53.9 million was included in Other liabilities.
In this type of structured partnership interest, the Affiliate allocates a specified percentage of its revenue to us and Affiliate management, while using the remainder of its revenue for operating expenses and for additional distributions to Affiliate management.
Where we share in the Affiliate’s revenue without regard to expenses, the Affiliate allocates a specified percentage of its revenue to us and Affiliate management, while using the remainder for operating expenses and additional distributions to Affiliate management.
A reduction in our credit ratings could also increase our borrowing costs under our credit facilities or, in certain cases, give rise to a termination right by the counterparty under our derivative financial instruments.
A reduction in our credit ratings could also increase our borrowing costs under our credit facilities or, in certain cases, give rise to a termination right by the counterparty under our derivative financial instruments. There can be no assurance that we will achieve a particular credit rating or maintain any particular rating in the future.
Through our Affiliates, we derive almost all of our asset- and performance-based fees from clients pursuant to investment management contracts. While certain of our Affiliates’ private equity and alternative products have long-term commitment periods, many of our Affiliates’ investment management contracts are terminable by the client without penalty upon relatively short notice (typically not longer than 60 days).
While certain of our Affiliates’ private equity and alternative products have long-term commitment periods, many of our Affiliates’ investment management contracts are terminable by the client without penalty upon relatively short notice (typically not longer than 60 days). We cannot be certain that our Affiliates will be able to retain their existing clients or attract new clients.
Further, the impact of Affiliate expenses on our earnings and our stock price could increase if the portion of our earnings derived from such Affiliates increases. 10 Tab l e of Contents As a result of these factors, unanticipated changes in revenue, operating expenses, or other commitments at any of our Affiliates could leave the Affiliate with a shortfall in remaining funds for distribution to us or Affiliate management, or for funding their operations.
As a result of these factors, unanticipated changes in revenue, operating expenses, or other commitments at any of our Affiliates could leave the Affiliate with a shortfall in remaining funds for distribution to us or Affiliate management, or for funding their operations.
Further, regulations in the EU pertaining to integrating ESG topics may materially impact the investment management industry in member states that adopt such legislation.
For example, regulations in the European Union (the “EU”) pertaining to integrating ESG topics may materially impact the investment management industry in member states that have adopted, or may in the future adopt, such legislation.
Further, government and regulatory oversight of data privacy in particular has been growing in recent years, including through the EU’s General Data Protection Regulation and the California Consumer Privacy Act, resulting in heightened data security and handling requirements, increased fines, and expanded incident response and reporting obligations.
Further, government and regulatory oversight of data privacy in particular has become a priority for regulators around the world, including as examples, through the EU’s General Data Protection Regulation and the California Privacy Rights Act, resulting in heightened data security and handling requirements, increased enforcement risk and fines, increased compliance costs, and expanded incident response and reporting obligations.
Any of the forgoing factors may inhibit a change in control in circumstances that could give our stockholders the opportunity to realize a premium over the market price of our common stock, or may result in negative impacts on our financial results in periods prior to and following a change in control.
Any of the forgoing factors may inhibit a change in control in circumstances that could give our stockholders the opportunity to realize a premium over the market price of our common stock, or may result in negative impacts on our financial results in periods prior to and following a change in control. 13 Table of Contents In addition, a change in control of the Company or the acquisition of a large ownership position in shares of our outstanding common stock by a single holder may constitute a change in control for certain of our Affiliates for purposes of the Advisers Act and the Investment Company Act.
More recently, the SEC proposed new rules related to cybersecurity risk management for public companies and registered investment advisers, which may result in increased disclosure obligations and liabilities related to our and our Affiliates’ technology systems and networks.
More recently, the SEC has implemented new rules related to cybersecurity risk management for public companies and is expected to implement similar new rules for registered investment advisers, broker-dealers, and funds, which have resulted or may result, as applicable, in increased disclosure requirements, obligations to report certain cybersecurity incidents to the SEC, and liabilities related to our and our Affiliates’ technology systems and networks.
The total level of our assets under management generally or with respect to particular products or Affiliates could be adversely affected by conditions outside of our control, including: • a decline in the market value of our assets under management, due to declines or heightened volatility in the capital markets, fluctuations in foreign currency exchange rates and interest rates, the current inflationary environment, changes in the yield curve, and other market factors; • changes in investor risk tolerance or investment preferences, which could result in investor allocations away from strategies and products offered by our Affiliates; • our Affiliates’ ability to attract and retain client assets and market products and services, which may be impacted by investment performance, client relationships, demand for product and service offerings, their continued development of products to meet the changing demands of investors, and the prices of securities generally; • global economic conditions, which may be exacerbated by changes in the equity or debt markets; • financial crises, political or diplomatic developments in the U.S. or globally, including rising trade tensions between the U.S. and China, pandemics or other public health crises, such as a potential resurgence of COVID-19 or another similar highly infectious or contagious disease, trade wars, social or civil unrest, insurrection, war, including the 7 Tab l e of Contents ongoing conflict between Russia and Ukraine which has significantly impacted the global economy and financial markets, terrorism, natural disasters, or risks associated with global climate change; and • other factors that are difficult to predict.
The total level of our assets under management generally or with respect to particular products or Affiliates could be adversely affected by conditions outside of our control, including: • a decline in the market value of our assets under management, due to declines or heightened volatility in the capital markets, fluctuations in foreign currency exchange rates and interest rates, the recent inflationary environment, changes in the yield curve, and other market factors; • changes in investor risk tolerance or investment preferences, which could result in investor allocations away from strategies and products offered by our Affiliates; 7 Table of Contents • our Affiliates’ ability to attract and retain client assets and market products and services, which may be impacted by investment performance, client relationships, demand for product and service offerings, their continued development of products to meet the changing demands of investors, and the prices of securities generally; • global economic conditions, which may be exacerbated by changes in the equity or debt markets, including impacts from monetary policies of the U.S.
Similarly, an Affiliate’s payment of distributions to us may be subject to claims by potential creditors, and an Affiliate may default on distributions that are payable to us. In addition, with respect to each of these Affiliates, we may be held liable in some circumstances as a control person for the acts of the Affiliate or its employees.
In addition, with respect to each of these Affiliates, we may be held liable in some circumstances as a control person for the acts of the Affiliate or its employees.
If further tax reform proposals are introduced in the U.S., they could materially impact our tax provision, deferred tax assets, tax liabilities and effective tax rate.
If new tax reform proposals are introduced in the U.S., they could materially impact our tax provision, deferred tax assets, tax liabilities, tax credit planning, and effective tax rate, or impact decisions on how to return value to stockholders in the most efficient manner.
Similar regulatory measures may be introduced in other jurisdictions in which we or our Affiliates currently have investments or plan to invest in the future, including in the U.S. and the UK. These types of ESG-related regulations could impact our or our Affiliates’ businesses, increases regulatory and compliance costs, and adversely affect our profitability.
Similar regulatory measures have been, and may in the future be, introduced in other jurisdictions in which we or our Affiliates currently have investments or plan to invest in the future, including in the U.S. and the UK, as applicable.
Further, we have significant purchase obligations 8 Tab l e of Contents relating to Affiliate equity interests, and it is difficult to predict the frequency and magnitude of these purchases.
Further, we have significant purchase obligations relating to Affiliate equity interests, as well as commitments relating to general partner and seed capital investments, and it is difficult to predict the frequency and magnitude of these purchases or associated capital calls.
The financial and reputational impact of control failures can be significant. In addition, our and our Affiliates’ businesses and the markets in which we and our Affiliates operate are continuously evolving.
The financial and reputational impact of control failures can be significant. In addition, our and our Affiliates’ businesses and the markets in which we and our Affiliates operate are continuously evolving. For example, the use of generative AI technologies by us, our Affiliates, or our respective third-party service providers could result in new and expanded risks.
Consequently, to the extent that any of 14 Tab l e of Contents these Affiliates incur liabilities or expenses that exceed their ability to pay for them, we may be directly or indirectly liable for their payment.
Consequently, to the extent that any of these Affiliates incur liabilities or expenses that exceed their ability to pay for them, we may be directly or indirectly liable for their payment. Similarly, an Affiliate’s payment of distributions to us may be subject to claims by potential creditors, and an Affiliate may default on distributions that are payable to us.
In addition, investment management contracts with mutual funds or other similar products are subject to annual approval by the fund’s board of directors. We may need to raise additional capital in the future, and existing or future resources may not be available to us in sufficient amounts or on acceptable terms.
We may need to raise additional capital in the future, and existing or future resources may not be available to us in sufficient amounts or on acceptable terms.
In the U.S., the current presidential administration has shifted enforcement priorities under existing regulations, and has been pursuing additional rulemaking, impacting public companies and the financial services industry, including private and public funds, in areas relating to ESG matters and disclosures, data security risk management and disclosures, share buybacks, and additional asset management disclosure and compliance requirements.
In the U.S., the presidential administration has actively pursued an expanded scope of enforcement priorities under existing regulations, and has been pursuing additional rulemaking and disclosure obligations, impacting public companies and the financial services industry, including private and public funds.
See “Liquidity and Capital Resources-Affiliate Equity” in Item 7 and Notes 17 and 18 of the Consolidated Financial Statements. These obligations may require more cash than is then available from our existing cash resources and cash flows from operations.
These obligations may require more cash than is then available from our existing cash resources and cash flows from operations.
See “Competition” in Item 1. Our Affiliates may not compare favorably with their competitors in any or all of these categories. From time to time, our Affiliates may also compete with each other for clients. Investment management contracts are subject to termination on short notice.
From time to time, our Affiliates may also compete with each other for clients and investment opportunities. Investment management contracts are subject to termination on short notice. Through our Affiliates, we derive almost all of our asset- and performance-based fees from clients pursuant to investment management contracts.
A reduction in our assets under management could adversely affect the fees payable to our Affiliates and, ultimately, our financial condition and results of operations. If our or our Affiliates’ reputations are harmed, we could suffer losses in our business and financial results.
A reduction in our assets under management could adversely affect the fees payable to our Affiliates and, ultimately, our financial condition and results of operations. To the extent any of these conditions or factors adversely affect our or our Affiliates’ operations or global economic conditions generally, they may also have the effect of heightening other risks described below.
These firms may also compete by seeking to capitalize on a trend towards institutions consolidating the number of investment managers they work with. Competition from these firms may reduce the fees that our Affiliates can obtain for investment management services, or could impair our Affiliates’ ability to attract and retain client assets.
These firms may also compete by seeking to capitalize on a trend towards institutions consolidating the 8 Table of Contents number of investment managers they work with.
We cannot be certain that our Affiliates will be able to retain their existing clients or attract new clients. If our Affiliates’ clients terminate their investment management contracts or withdraw a substantial amount of assets, it is likely to harm our results of operations.
If our Affiliates’ clients terminate their investment management contracts or withdraw a substantial amount of assets, it is likely to harm our results of operations. In addition, investment management contracts with mutual funds or other similar products are subject to annual approval by the fund’s board of directors.
Our growth strategy also includes pursuing strategic partnerships in areas where we can assist our Affiliates in growing and diversifying their businesses. These strategic partnerships may involve risks and require resources and investment, and there is no certainty that such partnerships will deliver the anticipated benefits over the expected time frame or at all.
Our growth strategy also includes pursuing strategic partnerships and transactions in areas where we can assist our Affiliates in growing and diversifying their businesses to further enhance our competitive position, which may involve new operational areas, product structures or strategies, and expanding the geography and scope of our operations.
Removed
Further, stakeholder groups have increasingly expressed divergent views on a range of environmental, social, and governance (“ESG”) matters, and our or certain of our Affiliates’ related investments or business practices could be perceived negatively.
Added
Investors should carefully consider these risks, along with the other information contained in this Annual Report on Form 10-K, before making an investment decision regarding our common stock or other publicly-listed securities. There may be additional risks of which we are currently unaware, or which we currently consider immaterial.
Removed
For other Affiliates, we use structured partnership interests in which we contractually share in the Affiliate’s revenue less agreed-upon expenses. This type of partnership interest allows us to benefit from any increase in revenue or any decrease in the agreed-upon expenses, but also exposes us to any decrease in revenue or any increase in such expenses.
Added
Any of these risks could have a material adverse effect on our financial condition, results of operations, and the market price of our common stock. Certain statements in “Risk Factors” are forward-looking statements.
Removed
In addition, a change in control of the Company or the acquisition of a large ownership position in shares of our outstanding common stock by a single holder may constitute a change in control for certain of our Affiliates for purposes of the Advisers Act and the Investment Company Act.
Added
Challenging market conditions, volatility or slowdowns affecting a particular asset class, client type, product structure, geographic region, industry or other category of investment could have a significant adverse impact on a specific Affiliate if its investments are concentrated in that area, which could result in lower investment returns and in turn, lower fees earned at that Affiliate.
Removed
For example, the SEC has proposed new rules for private fund advisers that if enacted, would prohibit seeking reimbursement, indemnification, exculpation, or limitation of liability for breach of fiduciary duty, willful malfeasance, bad faith, negligence, or recklessness in providing services to the fund.
Added
Federal Reserve Bank and other global central banks in response to inflation, or instability and liquidity issues in the financial system generally; • financial crises, political or diplomatic developments in the U.S. or globally, including rising trade tensions between the U.S. and China, pandemics or other public health crises, trade wars, social or civil unrest, insurrection, war, terrorism, natural disasters, or risks associated with global climate change; and • other factors that are difficult to predict.
Removed
For example, our and our Affiliates’ businesses may be impacted by the terms of trade agreements negotiated by the UK in connection with its exit from the European Union (the “EU”), which could result in fluctuations in exchange rates, disruptions in the capital markets, changes in investor risk tolerance or investment preferences, potential regulatory shifts resulting from the UK’s status as a third-country with the EU, increased compliance and administrative costs, or other impacts.
Added
Competition from these firms may reduce the fees that our Affiliates can obtain for investment management services, or could impair our Affiliates’ ability to attract and retain client assets, and any failure by our Affiliates to successfully develop competing new products and services, or effectively manage the associated operational risks, could harm our Affiliates’ reputations and expose them to additional costs or regulatory scrutiny, which could adversely affect our assets under management, financial condition and results of operations.
Removed
In the U.S., the Inflation Reduction Act of 2022, which was signed into law in August 2022, contained a number of changes to federal tax laws including a new corporate minimum tax as well as a new excise tax on stock repurchases, neither of which we expect to have a significant impact on our net income and cash flows, but which could impact future decisions on how to return value to stockholders in the most efficient manner.
Added
See “Competition” in Item 1. Our Affiliates may not compare favorably with their competitors in any or all of these categories, and technological developments, including financial applications and services based on artificial intelligence (“AI”), may over time reduce the demand for, or clients’ willingness to pay for, certain products and services.
Added
Valuation methodologies for assets within private markets funds, liquid alternatives, and similar products of certain of our Affiliates can be subject to significant subjectivity. Certain of our Affiliates offer private markets, liquid alternative, and other strategies that may invest in assets for which there may be no readily ascertainable market prices available on a regular basis or at all.
Added
In addition, many of these investments are, or may in the future be, concentrated in industries or sectors that could experience volatility or uncertainties, and may be subject to rapid changes in value caused by company-specific or industry-wide developments.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeHowever, there is no assurance as to whether or not any such matters could arise or have a material effect on our or our Affiliates’ financial position, liquidity, or results of operations in any future reporting period. Item 4. Mine Safety Disclosures Not applicable. 16 Tab l e of Contents PART II
Biggest changeHowever, there is no assurance as to whether or not any such matters could arise or have a material effect on our or our Affiliates’ financial position, liquidity, or results of operations in any future reporting period. Item 4. Mine Safety Disclosures Not applicable. 19 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−3 removed2 unchanged
Biggest changeAs of December 31, 2022, we had repurchased all of the shares of the January 2021 program. (3) In December 2022, we entered into an accelerated share repurchase agreement to repurchase shares of our common stock in exchange for an upfront payment of $225.0 million.
Biggest changeAs of December 31, 2023, we had repurchased all of the shares in the repurchase program authorized in January 2022.
(2) Our Board of Directors authorized share repurchase programs in October 2022, January 2022, and January 2021 to repurchase up to 3.0 million, 2.0 million, and 5.0 million shares of our common stock, respectively, and these authorizations have no expiry.
(2) Our Board of Directors authorized share repurchase programs in January 2022, October 2022, and October 2023 to repurchase up to 2.0 million, 3.0 million, and 3.3 million shares of our common stock, respectively, and these authorizations have no expiry.
The following graph compares the cumulative stockholder return on our common stock from December 31, 2017 through December 31, 2022, with the cumulative total return, during the same period, on the Standard & Poor’s MidCap 400 Index, our prior peer group, and our current peer group.
The following graph compares the cumulative stockholder return on our common stock from December 31, 2018 through December 31, 2023, with the cumulative total return, during the same period, on the Standard & Poor’s MidCap 400 Index, our prior peer group, and our current peer group.
As of February 15, 2023, there were 94 stockholders of record , including banks, brokers, and other financial institutions holding shares in omnibus accounts for their customers (in total representing substantially all of the beneficial holders of our common stock).
As of February 14, 2024, there were 104 stockholders of record , including banks, brokers, and other financial institutions holding shares in omnibus accounts for their customers (in total representing substantially all of the beneficial holders of our common stock).
For the years ended December 31, 2020, 2021, and 2022, we repurchased 5.0 million, 3.5 million, and 4.5 million shares of our common stock at an average price per share of $86.35, $146.54, and $144.45, respectively. 17 Tab l e of Contents Performance Graph Our peer group comprises AllianceBernstein Holding L.P., Ares Management Corporation, Artisan Partners Asset Management Inc., The Carlyle Group Inc., Federated Hermes, Inc., Franklin Resources, Inc., Invesco Ltd., Janus Henderson Group plc, Lazard Ltd., Victory Capital Holdings, Inc. and Virtus Investment Partners, Inc.
For the years ended December 31, 2021, 2022, and 2023, we repurchased 3.5 million, 4.5 million, and 3.0 million shares of our common stock at an average price per share of $146.54, $144.45, and $132.99, respectively. 20 Table of Contents Performance Graph Our peer group comprises AllianceBernstein Holding L.P., Ares Management Corporation, Artisan Partners Asset Management Inc., Blue Owl Capital Inc., The Carlyle Group Inc., Federated Hermes, Inc., Franklin Resources, Inc., Invesco Ltd., Janus Henderson Group plc, Lazard Ltd., TPG Inc., Victory Capital Holdings, Inc., and Virtus Investment Partners, Inc.
The comparison below assumes the investment of $100 on December 31, 2017 in our common stock and each of the comparison indices and, in each case, assumes reinvestment of all dividends.
The comparison below assumes the investment of $100 on December 31, 2018 in our common stock and each of the comparison indices and, in each case, assumes reinvestment of all dividends. Item 6. [Reserved] 21 Table of Contents
Issuer Purchases of Equity Securities Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Average Price Paid Per Share Maximum Number of Shares that May Yet Be Purchased Under Outstanding Plans or Programs (2) October 1-31, 2022 131,715 $ 119.40 131,715 $ 119.40 5,767,345 November 1-30, 2022 298,450 153.09 282,436 153.03 5,484,909 December 1-31, 2022 (3) 1,578,513 159.04 1,578,513 159.04 3,906,396 Total 2,008,678 155.56 1,992,664 155.57 __________________________ (1) Includes shares surrendered to the Company to satisfy tax withholding and/or option exercise price obligations in connection with stock swap and net settlement option exercise transactions, if any.
Issuer Purchases of Equity Securities Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Average Price Paid Per Share Maximum Number of Shares that May Yet Be Purchased Under Outstanding Plans or Programs (2) October 1-31, 2023 395,230 $ 126.51 395,230 $ 126.51 4,798,554 November 1-30, 2023 417,793 133.96 417,793 133.96 4,380,761 December 1-31, 2023 185,404 145.53 185,404 145.53 4,195,357 Total 998,427 133.16 998,427 133.16 ___________________________ (1) Includes shares surrendered to the Company to satisfy tax withholding and/or option exercise price obligations in connection with stock swap and option exercise transactions, if any.
Removed
We received an initial share delivery of 1.1 million shares in December 2022, which represents 80% of the upfront payment based on the closing price of our common stock on the agreement date.
Added
Our peer group was revised in 2023 to include two additional alternative-focused asset management companies, Blue Owl Capital Inc. and TPG Inc., to reflect the growing contribution of alternative strategies to our earnings.
Removed
The total number of shares to be repurchased will be based on volume-weighted average prices of our common stock during the term of the agreement less a discount and subject to adjustments pursuant to the terms and conditions of such agreement. The final settlement of this transaction is expected to be completed in the second or third quarter of 2023.
Removed
Prior to this year, our peer group also included Ameriprise Financial, Inc. Our peer group was revised in 2022 to reflect companies with size and market capitalizations that are more in line with our own.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

99 edited+20 added−44 removed50 unchanged
Biggest changeThe following table presents our Consolidated expenses: 24 Tab l e of Contents For the Years Ended December 31, (in millions) 2020 2021 % Change 2022 % Change Compensation and related expenses $ 883.7 $ 1,047.1 18 % $ 1,071.5 2 % Selling, general and administrative 321.4 347.1 8 % 385.5 11 % Intangible amortization and impairments 140.5 35.7 (75) % 51.6 45 % Interest expense 92.3 111.4 21 % 114.4 3 % Depreciation and other amortization 19.1 16.6 (13) % 15.8 (5) % Other expenses (net) 52.8 73.5 39 % 34.7 (53) % Total consolidated expenses $ 1,509.8 $ 1,631.4 8 % $ 1,673.5 3 % Compensation and related expenses increased $24.4 million or 2% in 2022, primarily due to a $131.6 million increase in compensation as a result of new Affiliate investments in the fourth quarter of 2021.
Biggest changeThe following table presents our Consolidated expenses: For the Years Ended December 31, (in millions) 2021 2022 % Change 2023 % Change Compensation and related expenses $ 1,047.1 $ 1,071.5 2 % $ 907.5 (15) % Selling, general and administrative 347.1 385.5 11 % 358.2 (7) % Intangible amortization and impairments 35.7 51.6 45 % 48.3 (6) % Interest expense 111.4 114.4 3 % 123.8 8 % Depreciation and other amortization 16.6 15.8 (5) % 13.0 (18) % Other expenses (net) 73.5 34.7 (53) % 45.8 32 % Total consolidated expenses $ 1,631.4 $ 1,673.5 3 % $ 1,496.6 (11) % Compensation and related expenses decreased $164.0 million or 15% in 2023, primarily due to a $161.9 million decrease in compensation correlated to the decrease in Consolidated revenue and a $3.0 million decrease in share-based compensation. 27 Table of Contents Selling, general and administrative expenses decreased $27.3 million or 7% in 2023, primarily due to a $26.0 million decrease in distribution and investment-related expenses principally as a result of a decrease in average assets under management on which these expenses are incurred.
We believe Economic net income (controlling interest) and Economic earnings per share are important measures because they represent our performance before non-cash expenses relating to the acquisition of interests in Affiliates and improve comparability of performance between periods.
Economic Net Income (controlling interest) and Economic Earnings Per Share We believe Economic net income (controlling interest) and Economic earnings per share are important measures because they represent our performance before non-cash expenses relating to the acquisition of interests in Affiliates and improve comparability of performance between periods.
Equity Method Income (Loss) (Net) When we do not own a controlling equity interest in an Affiliate, but have significant influence, we account for our interest in the Affiliate under the equity method. Our share of earnings or losses from Affiliates accounted for under the equity method, net of amortization and impairments, is included in Equity method income (loss) (net).
Equity Method Income (Net) When we do not own a controlling equity interest in an Affiliate, but have significant influence, we account for our interest in the Affiliate under the equity method. Our share of earnings or losses from Affiliates accounted for under the equity method, net of amortization and impairments, is included in Equity method income (net).
We continue to invest in areas of long-term client demand — including private markets, liquid alternatives, sustainable strategies, wealth management, and Asia — through new and existing Affiliates, to better position AMG to benefit from industry growth trends.
We continue to invest in areas of long-term client demand — including private markets, liquid alternatives, sustainable investment strategies, wealth management, and Asia — through new and existing Affiliates, to better position AMG to benefit from industry growth trends.
(2) Foreign exchange reflects the impact of translating into U.S. dollars the assets under management of our Affiliates whose functional currency is not the U.S. dollar. (3) Other includes assets under management attributable to product transitions and reclassifications.
(2) Foreign exchange reflects the impact of translating the assets under management of our Affiliates whose functional currency is not the U.S. dollar into our functional currency. (3) Other includes assets under management attributable to product transitions and reclassifications.
(2) Foreign exchange reflects the impact of translating into U.S. dollars the assets under management of our Affiliates whose functional currency is not the U.S. dollar. (3) Other includes assets under management attributable to product transitions and reclassifications.
(2) Foreign exchange reflects the impact of translating the assets under management of our Affiliates whose functional currency is not the U.S. dollar into our functional currency. (3) Other includes assets under management attributable to product transitions and reclassifications.
Executive Overview AMG is a leading partner to independent investment management firms globally. Our strategy is to generate long-term value by investing in a diverse array of high-quality independent partner-owned firms, referred to as “Affiliates,” through a proven partnership approach, and allocating resources across our unique opportunity set to the areas of highest growth and return.
Executive Overview AMG is a strategic partner to leading independent investment firms globally. Our strategy is to generate long-term value by investing in a diverse array of high-quality independent partner-owned firms, referred to as “Affiliates,” through a proven partnership approach, and allocating resources across our unique opportunity set to the areas of highest growth and return.
The junior convertible securities are considered contingent payment debt instruments under federal income tax regulations, which require us to deduct interest in an amount greater than our reported interest expense. We estimate that these deductions will generate annual deferred tax liabilities of approximately $8 million.
The junior convertible securities are considered contingent payment debt instruments under federal income tax regulations, which require us to deduct interest in an amount greater than our reported interest expense. We estimate that these deductions will generate annual deferred tax liabilities of approximately $9 million.
Performance and AUM information is as of December 31, 2022 and is based on data available at the time of calculation. Product returns are sourced from Affiliates while benchmark returns are generally sourced via third-party subscriptions.
Performance and AUM information is as of December 31, 2023 and is based on data available at the time of calculation. Product returns are sourced from Affiliates while benchmark returns are generally sourced via third-party subscriptions.
To determine if a potential impairment is more-likely-than-not, we perform a single step quantitative test with any excess of carrying value over fair value recorded as an expense in Intangible amortization and impairments. We completed our annual goodwill impairment assessment as of September 30, 2022 and no impairment was indicated.
To determine if a potential impairment is more-likely-than-not, we perform a single step quantitative test with any excess of carrying value over fair value recorded as an expense in Intangible amortization and impairments. We completed our annual qualitative goodwill impairment assessment as of September 30, 2023 and no impairment was indicated.
In the fourth quarter of 2022, we completed the previously announced sale of our equity interest in Baring Private Equity Asia (“BPEA”), our Affiliate, to EQT AB (“EQT”), a public company listed on Nasdaq Stockholm (EQT.ST), (the “BPEA Transaction”) in connection with the strategic combination of BPEA and EQT.
In the fourth quarter of 2022, we completed the sale of our equity interest in Baring Private Equity Asia (“BPEA”) to EQT AB (“EQT”), a public company listed on Nasdaq Stockholm (EQT.ST), (the “BPEA Transaction”) in connection with the strategic combination of BPEA and EQT.
Pursuant to the terms of the Securities Purchase and Merger Agreement with EQT under which we and each of the other owners agreed to sell our respective equity interests in BPEA, we received $223.6 million in cash, net of transaction costs, and 28.68 million EQT ordinary shares (25% of which are subject to a six-month lock-up, which expires in April 2023), and other investments.
Pursuant to the terms of the Securities Purchase and Merger Agreement with EQT, under which we and each of the other owners agreed to sell our respective equity interests in BPEA, we received $223.6 million in cash, net of transaction costs, and 28.68 million EQT ordinary shares (25% of which were subject to a six-month lock-up, which expired in April 2023), and other investments.
We perform indefinite-lived acquired client relationship impairment assessments annually, or more frequently should circumstances indicate fair value has declined below the related carrying value. For purposes of our assessments, we consider various qualitative and quantitative factors (including market multiples) and determine if it is more-likely-than-not that the fair value of each asset group is greater than its carrying amount.
We perform indefinite-lived acquired client relationship impairment assessments annually, or more frequently should circumstances indicate fair value has declined below the related carrying value. For purposes of our assessments, we consider various qualitative and quantitative factors to determine if it is more-likely-than-not that the fair value of each asset group is greater than its carrying amount.
In the event of a purchase, we become the owner of the cash flow associated with the purchased equity. See Notes 17 and 18 of our Consolidated Financial Statements.
In the event of a purchase, we become the owner of the cash flow associated with the purchased equity. See Notes 16 and 17 of our Consolidated Financial Statements.
We expect investments in new Affiliates, investments in existing Affiliates primarily through purchases of Affiliate equity interests and general partner and seed capital investments, the return of capital through share repurchases and the payment of cash dividends on our common stock, repayment of debt, distributions to Affiliate equity holders, and general working capital to be the primary uses of cash on a consolidated basis for the foreseeable future.
We expect investments in new Affiliates, investments in existing Affiliates, primarily through purchases of Affiliate equity interests and general partner and seed capital investments, the return of capital through share repurchases and the payment of cash dividends on our common stock, repayment of debt, distributions to Affiliate equity holders, payment of income taxes, purchases of marketable securities, and general working capital to be the primary uses of cash on a consolidated basis for the foreseeable future.
Our discussion and analysis of the key operating performance measures and financial results for fiscal year 2022 compared to fiscal year 2021 is included herein.
Our discussion and analysis of the key operating performance measures and financial results for fiscal year 2023 compared to fiscal year 2022 is included herein.
For discussion and analysis of fiscal year 2021 compared to fiscal year 2020, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 18, 2022.
For discussion and analysis of fiscal year 2022 compared to fiscal year 2021, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 17, 2023.
Aggregate fees consist of the total asset- and performance-based fees earned by all of our consolidated and equity method Affiliates. For certain of our Affiliates accounted for under the equity method, we report aggregate fees and the Affiliate’s financial results in our Consolidated Financial Statements one quarter in arrears.
Aggregate fees consist of the total asset- and performance-based fees earned by all of our consolidated and equity method Affiliates. For certain of our Affiliates accounted for under the equity method, we report the Affiliate’s aggregate fees one quarter in arrears.
For our Affiliates accounted for under the equity method, we do not separately report intangible amortization and impairments in our Consolidated Statements of Income. Our share of these Affiliates’ amortization and impairments is reported in Equity method income (loss) (net).
For our Affiliates accounted for under the equity method, we do not separately report intangible amortization and impairments in our Consolidated Statements of Income. Our share of these Affiliates’ amortization and impairments is included in Equity method income (net).
For the years ended December 31, 2020, 2021, and 2022, other economic items were net of income tax expense (benefit) of $2.6 million, $21.8 million, and $(6.4) million, respectively.
For the years ended December 31, 2021, 2022, and 2023, other economic items were net of income tax expense (benefit) of $21.8 million, $(6.4) million, and $5.2 million, respectively.
We also add back the deferred taxes attributable to intangible assets because we believe it is unlikely these accruals will be used to settle material tax obligations. Further, we add back gains and losses related to the BPEA Transaction, net of tax and other economic items to improve comparability of performance between periods.
We also add back the deferred taxes attributable to intangible assets because we believe it is unlikely these accruals will be used to settle material tax obligations. Further, we adjust for gains and losses related to the BPEA and Veritable Transactions, net of tax and other economic items to improve comparability of performance between periods.
Financial and Supplemental Financial Performance Measures The following table presents our key financial and supplemental financial performance measures: For the Years Ended December 31, (in millions) 2020 2021 % Change 2022 % Change Net income (controlling interest) $ 202.2 $ 565.7 N.M. (1) $ 1,145.9 N.M.
Financial and Supplemental Financial Performance Measures The following table presents our key financial and supplemental financial performance measures: For the Years Ended December 31, (in millions) 2021 2022 % Change 2023 % Change Net income (controlling interest) $ 565.7 $ 1,145.9 N.M.
We believe the inclusion of net shares under a treasury stock method best reflects the benefit of the increase in 28 Tab l e of Contents available capital resources (which could be used to repurchase shares of common stock) that occurs when these securities are converted and we are relieved of our debt obligation.
We believe the inclusion of net shares under a treasury stock method best reflects the benefit of the increase in available capital resources (which could be used to repurchase shares of common stock) that occurs when these securities are converted and we are relieved of our debt obligation.
Based on our assessment, the fair value of our reporting unit was substantially greater than its respective carrying amount, including goodwill. 33 Tab l e of Contents Indefinite-Lived Acquired Client Relationships Indefinite-lived acquired client relationships include investment advisory contracts between our Affiliates and their mutual funds and other retail-oriented investment products.
Based on our assessment, the fair value of our reporting unit was substantially greater than its respective carrying amount, including goodwill. Indefinite-Lived Acquired Client Relationships Indefinite-lived acquired client relationships include investment advisory contracts between our Affiliates and their mutual funds and other retail-oriented investment products.
These investment products are primarily customized toward wealth preservation, estate planning, and liability and tax management, and therefore are typically not measured against a benchmark. 22 Tab l e of Contents (4) For private markets products, performance is reported as the percentage of assets that have outperformed benchmarks on a since-inception internal rate of return basis.
These investment products are primarily customized toward wealth preservation, estate planning, and liability and tax management, and therefore are typically not measured against a benchmark. 25 Table of Contents (4) For private markets products, performance is reported as the percentage of assets that have outperformed benchmarks on a since-inception internal rate of return basis.
The following charts present information regarding the composition of our assets under management by strategy as of December 31, 2021 and 2022: Assets Under Management by Strategy __________________________ (1) Alternatives include private markets strategies, which accounted for 15% of our assets under management as of December 31, 2021 and 2022.
The following charts present information regarding the composition of our assets under management by strategy as of December 31, 2022 and 2023: Assets Under Management by Strategy ___________________________ (1) Alternatives include private markets strategies, which accounted for 15% and 17% of our assets under management as of December 31, 2022 and 2023, respectively.
The term loan matures on October 23, 2026. Subject to certain conditions, we may increase the commitments under the revolver by up to an additional $500.0 million and may borrow up to an additional $75.0 million under the term loan. Under the terms of the credit facilities we are required to meet two financial ratio covenants.
Subject to certain conditions, we may increase the commitments under the revolver by up to an additional $500.0 million and may borrow up to an additional $75.0 million under the term loan. Under the terms of the credit facilities we are required to meet two financial ratio covenants.
As of December 31, 2022, our bank leverage and bank interest coverage ratios were 1.2x and 10.3x, respectively, and we were in compliance with all of the terms of our credit facilities. As of December 31, 2022, we had no outstanding borrowings under the revolver and could borrow all capacity and remain in compliance with our credit facilities.
As of December 31, 2023, our bank leverage and bank interest coverage ratios were 1.3x and 8.3x, respectively, and we were in compliance with all of the terms of our credit facilities. As of December 31, 2023, we had no outstanding borrowings under the revolver and could borrow all capacity and remain in compliance with our credit facilities.
In this qualitative assessment, we typically measure the excess of the fair value of our reporting unit over its carrying value using various qualitative and quantitative factors (including our market capitalization and market multiples for asset management businesses).
In this qualitative assessment, we typically measure the excess of the fair value of our reporting unit over its carrying value using various qualitative and quantitative factors (including our market capitalization).
The following table presents operating, investing, and financing cash flow activities: For the Years Ended December 31, (in millions) 2020 2021 2022 Operating cash flow $ 1,009.3 $ 1,259.2 $ 1,054.7 Investing cash flow (53.7) (583.7) (109.9) Financing cash flow (455.4) (798.3) (1,402.9) Operating Cash Flow Operating cash flows are calculated by adjusting Net income for other significant sources and uses of cash, significant non-cash items, and timing differences in the cash settlement of assets and liabilities.
The following table presents operating, investing, and financing cash flow activities: For the Years Ended December 31, (in millions) 2021 2022 2023 Operating cash flow $ 1,259.2 $ 1,054.7 $ 874.3 Investing cash flow (583.7) (109.9) 264.5 Financing cash flow (798.3) (1,402.9) (758.3) Operating Cash Flow Operating cash flows are calculated by adjusting Net income for other significant sources and uses of cash, significant non-cash items, and timing differences in the cash settlement of assets and liabilities.
The following table presents the Intangible amortization and impairments shown above: For the Years Ended December 31, (in millions) 2020 2021 2022 Consolidated intangible amortization and impairments $ 140.5 $ 35.7 $ 51.6 Consolidated intangible amortization and impairments (non-controlling interests) (44.8) (10.8) (15.7) Equity method intangible amortization and impairments 332.0 175.0 159.1 Total $ 427.7 $ 199.9 $ 195.0 (2) Includes BPEA Transaction gain of $641.9 million and realized and unrealized gains on EQT ordinary shares of $43.8 million and $57.9 million, respectively.
The following table presents the Intangible amortization and impairments shown above: For the Years Ended December 31, (in millions) 2021 2022 2023 Consolidated intangible amortization and impairments $ 35.7 $ 51.6 $ 48.3 Consolidated intangible amortization and impairments (non-controlling interests) (10.8) (15.7) (15.4) Equity method intangible amortization and impairments 175.0 159.1 95.6 Total $ 199.9 $ 195.0 $ 128.5 (2) The year ended December 31, 2022 includes BPEA Transaction gain of $641.9 million and realized and unrealized gains on EQT ordinary shares of $43.8 million and $57.9 million, respectively.
(3) Includes BPEA Transaction gain of $641.9 million and realized and unrealized gains on EQT ordinary shares of $43.8 million and $57.9 million, respectively, net of $167.6 million of income tax expense.
(3) The year ended December 31, 2022 includes BPEA Transaction gain of $641.9 million and realized and unrealized gains on EQT ordinary shares of $43.8 million and $57.9 million, respectively, net of $167.6 million of income tax expense.
Operating Performance Measures Under accounting principles generally accepted in the U.S. (“GAAP”), we are required to consolidate certain of our Affiliates and use the equity method of accounting for others.
Our gain on the transaction was $641.9 million. Operating Performance Measures Under accounting principles generally accepted in the U.S. (“GAAP”), we are required to consolidate certain of our Affiliates and use the equity method of accounting for others.
The following table presents changes in our assets under management by strategy: 20 Tab l e of Contents (in billions) Alternatives Global Equities U.S.
The following table presents changes in our assets under management by strategy: 23 Table of Contents (in billions) Alternatives Global Equities U.S.
December 31, (in millions) 2020 2021 2022 Senior bank debt $ 350.0 $ 350.0 $ 350.0 Senior notes 1,097.3 1,098.0 1,098.7 Junior subordinated notes 565.7 765.8 765.9 Junior convertible securities 318.4 299.5 341.7 The carrying value of our debt differs from the amount reported in the notes to our Consolidated Financial Statements, as the carrying value of our debt in the table above is not reduced for debt issuance costs.
See Note 6 of our Consolidated Financial Statements. 33 Table of Contents December 31, (in millions) 2021 2022 2023 Senior bank debt $ 350.0 $ 350.0 $ 350.0 Senior notes 1,098.0 1,098.7 1,099.4 Junior subordinated notes 765.8 765.9 765.9 Junior convertible securities 299.5 341.7 341.7 The carrying value of our debt differs from the amount reported in the notes to our Consolidated Financial Statements, as the carrying value of our debt in the table above is not reduced for debt issuance costs.
We continue to see demand for alternative strategies, as evidenced by our net inflows in this category for the year ended December 31, 2022. At the same time, we experienced outflows in equity strategies, particularly in global equities, in line with de-risking trends across the industry.
We continue to see demand for alternative strategies, as evidenced by our net inflows in this category for the year ended December 31, 2023. At the same time, our equity strategies saw outflows, particularly in global equities, in line with client cash flow trends across the industry.
Adjusted EBITDA (controlling interest) is an important supplemental financial performance measure for management as it provides a comprehensive view of our share of the financial performance of our business before interest expense, income taxes, depreciation, amortization, impairments, gains and losses related to the BPEA Transaction, certain Affiliate equity expenses, certain gains and losses, including on general partner and seed capital investments, certain non-income based taxes, and adjustments to our contingent payment obligations.
Adjusted EBITDA (controlling interest) Adjusted EBITDA (controlling interest) is an important supplemental financial performance measure for management as it provides a comprehensive view of our share of the financial performance of our business before interest expense, income and certain non-income based taxes, depreciation, amortization, impairments, gains and losses related to the BPEA and Veritable Transactions, and non-cash items such as certain Affiliate equity activity, gains and losses on our contingent payment obligations, and unrealized gains and losses on seed capital, general partner commitments, and other strategic investments.
Share Repurchases 30 Tab l e of Contents Our Board of Directors authorized share repurchase programs in October 2022, January 2022, and January 2021, to repurchase up to 3.0 million, 2.0 million, and 5.0 million shares of our common stock, respectively, and these authorizations have no expiry.
Share Repurchases Our Board of Directors authorized share repurchase programs in January 2022, October 2022, and October 2023 to repurchase up to 2.0 million, 3.0 million, and 3.3 million shares of our common stock, respectively, and these authorizations have no expiry.
The following are our critical accounting estimates and judgments used in the preparation of our Consolidated Financial Statements, and due to their subjectivity, actual results could differ materially from the amounts reported.
See Note 1 of our Consolidated Financial Statements for a discussion of our significant accounting policies. The following are our critical accounting estimates and judgments used in the preparation of our Consolidated Financial Statements, and due to their subjectivity, actual results could differ materially from the amounts reported.
Equity method earnings increased more than equity method revenue on a percentage basis primarily due to the recognition of performance-based fees earned by Affiliates in which we hold more of an economic interest and the impact of our additional investment in Systematica.
Equity method earnings decreased more than equity method revenue on a percentage basis primarily due to the recognition of performance-based fees earned by Affiliates in which we hold less of an economic interest.
Critical Accounting Estimates and Judgments The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in our Consolidated Financial Statements and accompanying notes. See Note 1 of our Consolidated Financial Statements for a discussion of our significant accounting policies.
Recent Accounting Developments See Note 1 of our Consolidated Financial Statements. 35 Table of Contents Critical Accounting Estimates and Judgments The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in our Consolidated Financial Statements and accompanying notes.
The following table presents a reconciliation of Net income (controlling interest) to Economic net income (controlling interest) and Economic earnings per share: For the Years Ended December 31, (in millions, except per share data) 2020 2021 2022 Net income (controlling interest) $ 202.2 $ 565.7 $ 1,145.9 Intangible amortization and impairments (1) 427.7 199.9 195.0 Intangible-related deferred taxes (2) (9.9) 52.5 45.5 BPEA Transaction (3) — — (576.0) Other economic items (4) 4.4 (38.3) (8.3) Economic net income (controlling interest) $ 624.4 $ 779.8 $ 802.1 Average shares outstanding (diluted) 46.7 44.8 49.0 Hypothetical issuance of shares to settle Redeemable non-controlling interests — — (7.4) Assumed issuance of junior convertible securities shares — (2.1) (1.8) Average shares outstanding (adjusted diluted) 46.7 42.7 39.8 Economic earnings per share $ 13.36 $ 18.28 $ 20.14 __________________________ (1) See note (1) to the table in “Adjusted EBITDA (controlling interest).” (2) For the year ended December 31, 2022, intangible-related deferred taxes have been adjusted to eliminate a $13.5 million benefit related to the BPEA Transaction.
The following table presents a reconciliation of Net income (controlling interest) to Economic net income (controlling interest) and Economic earnings per share: For the Years Ended December 31, (in millions, except per share data) 2021 2022 2023 Net income (controlling interest) $ 565.7 $ 1,145.9 $ 672.9 Intangible amortization and impairments (1) 199.9 195.0 128.5 Intangible-related deferred taxes (2) 52.5 45.5 57.3 Affiliate Transactions (3) — (576.0) (122.1) Other economic items (4) (48.1) (13.2) (18.8) Economic net income (controlling interest) $ 770.0 $ 797.2 $ 717.8 Average shares outstanding (diluted) 44.8 49.0 42.2 Hypothetical issuance of shares to settle Redeemable non-controlling interests — (7.4) (3.7) Assumed issuance of junior convertible securities shares (2.1) (1.8) (1.7) Average shares outstanding (adjusted diluted) 42.7 39.8 36.8 Economic earnings per share $ 18.05 $ 20.02 $ 19.48 ___________________________ (1) See note (1) to the table in “Adjusted EBITDA (controlling interest).” 31 Table of Contents (2) For the years ended December 31, 2022, and 2023, intangible-related deferred taxes have been adjusted to eliminate benefits of $13.5 million related to the BPEA Transaction and $28.9 million related to the Veritable Transaction, respectively.
The following tables present performance of our investment strategies, where available, measured by the percentage of assets under management ahead of their relevant benchmark: AUM Weight % of AUM Ahead of Benchmark (1) 3-year 5-year 10-year Liquid alternatives (2) 19 % 69 % 77 % 82 % Global equity (2) 29 % 56 % 46 % 69 % U.S. equity (2) 20 % 84 % 78 % 84 % Multi-asset and fixed income (3) 17 % N/A N/A N/A AUM Weight % of AUM Ahead of Benchmark (1) IRR Latest Vintage IRR Last Three Vintages Private markets (4) 15 % 86 % 82 % __________________________ (1) Past performance is not indicative of future results.
The following tables present performance of our investment strategies, where available, measured by the percentage of assets under management ahead of their relevant benchmark: AUM Weight % of AUM Ahead of Benchmark (1) 3-year 5-year 10-year Liquid alternatives (2) 18 % 85 % 95 % 84 % Global equity (2) 28 % 44 % 43 % 61 % U.S. equity (2) 21 % 42 % 77 % 77 % Multi-asset and fixed income (3) 16 % N/A N/A N/A AUM Weight % of AUM Ahead of Benchmark (1) IRR Latest Vintage IRR Last Three Vintages Private markets (4) 17 % 83 % 84 % ___________________________ (1) Past performance is not indicative of future results.
Senior Notes As of December 31, 2022, we had senior notes outstanding, the respective principal terms of which are presented below: 31 Tab l e of Contents 2024 Senior Notes 2025 Senior Notes 2030 Senior Notes Issue date February 2014 February 2015 June 2020 Maturity date February 2024 August 2025 June 2030 Par value (in millions) $ 400.0 $ 350.0 $ 350.0 Stated coupon 4.25 % 3.50 % 3.30 % Coupon frequency Semi-annually Semi-annually Semi-annually Potential call date Any time Any time Any time Junior Subordinated Notes As of December 31, 2022, we had junior subordinated notes outstanding, the respective principal terms of which are presented below: 2059 Junior Subordinated Notes 2060 Junior Subordinated Notes 2061 Junior Subordinated Notes Issue date March 2019 September 2020 July 2021 Maturity date March 2059 September 2060 September 2061 Par value (in millions) $ 300.0 $ 275.0 $ 200.0 Stated coupon 5.875 % 4.75 % 4.20 % Coupon frequency Quarterly Quarterly Quarterly Potential call date March 2024 September 2025 September 2026 Listing NYSE NYSE NYSE Junior Convertible Securities As of December 31, 2022, we had $341.7 million of principal outstanding in our 5.15% junior convertible trust preferred securities outstanding (the “junior convertible securities”) maturing in 2037.
Junior Subordinated Notes As of December 31, 2023, we had junior subordinated notes outstanding, the respective principal terms of which are presented below: 34 Table of Contents 2059 Junior Subordinated Notes 2060 Junior Subordinated Notes 2061 Junior Subordinated Notes Issue date March 2019 September 2020 July 2021 Maturity date March 2059 September 2060 September 2061 Par value (in millions) $ 300.0 $ 275.0 $ 200.0 Stated coupon 5.875 % 4.75 % 4.20 % Coupon frequency Quarterly Quarterly Quarterly Potential call date March 2024 September 2025 September 2026 Listing NYSE NYSE NYSE Junior Convertible Securities As of December 31, 2023, we had $341.7 million of principal outstanding in our 5.15% junior convertible trust preferred securities outstanding (the “junior convertible securities”) maturing in 2037.
The portion of these lease obligations attributable to the controlling interest were $11.0 million through 2023, $20.1 million from 2024 through 2025, $6.4 million from 2026 through 2027, and $9.8 million thereafter. See Note 11 of our Consolidated Financial Statements. Recent Accounting Developments See Note 1 of our Consolidated Financial Statements.
The portion of these lease obligations attributable to the controlling interest were $11.3 million through 2024, $13.6 million from 2025 through 2026, $3.9 million from 2027 through 2028, and $8.0 million thereafter. See Note 10 of our Consolidated Financial Statements.
Consolidated Revenue Our Consolidated revenue is derived from our consolidated Affiliates, primarily from asset-based fees from investment management services. For these Affiliates, we typically use structured partnership interests in which we contractually share in the Affiliate’s revenue without regard to expenses.
We also use structured partnership interests in which we contractually share in the Affiliate’s revenue without regard to expenses. Our equity method revenue is derived primarily from asset- and performance-based fees from investment management services.
During the years ended December 31, 2021 and 2022, we repurchased a portion of our junior convertible securities for a purchase price of $33.0 million and $60.9 million, respectively, and as a result of these repurchases, we also reduced our Deferred income tax liability (net) by $7.0 million and $11.4 million, respectively.
For the year ended December 31, 2022, we repurchased a portion of our junior convertible securities for a purchase price of $60.9 million and as a result of these repurchases, we reduced our Deferred income tax liability (net) by $11.4 million. We did not repurchase any of our junior convertible securities during the year ended December 31, 2023.
As of December 31, 2022, we had repurchased all of the shares of the January 2021 authorized amount, and there were a total of 3.9 million shares available for repurchase under our October 2022 and January 2022 share repurchase programs.
As of December 31, 2023, we had repurchased all of the shares in the repurchase program authorized in January 2022, and there were a total of 4.2 million shares available for repurchase under our share repurchase programs.
The following table presents our key aggregate operating performance measures: 19 Tab l e of Contents As of and for the Years Ended December 31, (in billions, except as noted) 2020 2021 % Change 2022 % Change Assets under management $ 716.2 $ 813.8 14 % $ 650.8 (20) % Average assets under management 664.4 761.7 15 % 709.4 (7) % Aggregate fees (in millions) 4,626.4 5,611.4 21 % 5,560.5 (1) % Assets under management, and therefore average assets under management, include the assets under management of our consolidated and equity method Affiliates.
The following table presents our key aggregate operating performance measures: 22 Table of Contents As of and for the Years Ended December 31, (in billions, except as noted) 2021 2022 % Change 2023 % Change Assets under management $ 813.8 $ 650.8 (20) % $ 672.7 3 % Average assets under management 761.7 709.4 (7) % 660.3 (7) % Aggregate fees (in millions) 5,611.4 5,560.5 (1) % 5,066.6 (9) % Assets under management, and therefore average assets under management, include the assets under management of our consolidated and equity method Affiliates.
Cash and cash equivalents were $429.2 million as of December 31, 2022 and were attributable to both our controlling and the non-controlling interests. Our principal uses of cash in 2022 were for investments in new and existing Affiliates, purchases of marketable securities, and the return of excess capital through share repurchases.
Cash and cash equivalents were $813.6 million as of December 31, 2023 and were attributable to both our controlling and the non-controlling interests. Our principal uses of cash in 2023 were for investments in new Affiliates, purchases of investment securities, distributions to Affiliate equity holders, and the return of excess capital through share repurchases.
The following table presents our consolidated Affiliate average assets under management and Consolidated revenue: For the Years Ended December 31, (in millions, except as noted) 2020 2021 % Change 2022 % Change Consolidated Affiliate average assets under management (in billions) $ 362.6 $ 445.8 23 % $ 422.2 (5) % Consolidated revenue $ 2,027.5 $ 2,412.4 19 % $ 2,329.6 (3) % Our Consolidated revenue decreased $82.8 million or 3% in 2022, primarily due to a $149.1 million or 6% decrease from asset-based fees, partially offset by a $66.3 million or 3% increase from performance-based fees primarily in our private markets strategies.
The following table presents our consolidated Affiliates’ average assets under management and Consolidated revenue: For the Years Ended December 31, (in millions, except as noted) 2021 2022 % Change 2023 % Change Consolidated Affiliate average assets under management (in billions) $ 445.8 $ 422.2 (5) % $ 393.7 (7) % Consolidated revenue $ 2,412.4 $ 2,329.6 (3) % $ 2,057.8 (12) % Our Consolidated revenue decreased $271.8 million or 12% in 2023, due to a $165.5 million or 7% decrease from asset-based fees and a $106.3 million or 5% decrease from performance-based fees, primarily in our private markets strategies.
Our consolidated Affiliates’ financial results are included in our Consolidated revenue, Consolidated expenses, and Investment and other income, and our share of our equity method Affiliates’ financial results is reported, net of intangible amortization and impairments, in Equity method income (loss) (net).
Our consolidated Affiliates’ financial results are included in our Consolidated revenue, Consolidated expenses, and Investment and other income, and our share of our equity method Affiliates’ financial results is reported, net of intangible amortization and impairments, in Equity method income (net). Consolidated Revenue Our Consolidated revenue is derived from our consolidated Affiliates, primarily from asset-based fees from investment management services.
As of December 31, 2022, the current redemption value of Affiliate equity interests was $489.9 million, of which $465.4 million was presented as Redeemable non-controlling interests (including $20.1 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors), and $24.5 million was presented as Other liabilities.
As of December 31, 2023, the current redemption value of Affiliate equity interests was $447.3 million, of which $393.4 million was presented as Redeemable non-controlling interests (including $11.8 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors), and $53.9 million was included in Other liabilities.
Although the timing and amounts of these purchases are difficult to predict, we paid $61.5 million for Affiliate equity purchases and received $15.2 million for Affiliate equity issuances during 2022, and we expect net purchases of approximately $125 million of Affiliate equity in 2023.
Although the timing and amounts of these purchases are difficult to predict, we paid $67.4 million for Affiliate equity purchases and received $13.4 million for Affiliate equity issuances in 2023, and we expect net purchases of approximately $100 million of Affiliate equity in 2024.
Aggregate fees were $5,560.5 million in 2022, a decrease of $50.9 million or 1% as compared to 2021. The decrease in our aggregate fees was due to a $171.6 million or 3% decrease from asset-based fees, offset by a $120.7 million or 2% increase from performance-based fees primarily in our liquid alternative and private markets strategies.
Aggregate fees were $5,066.6 million in 2023, a decrease of $493.9 million or 9% as compared to 2022. The decrease in our aggregate fees was due to a $348.7 million or 6% decrease from asset-based fees and a $145.2 million or 3% decrease from performance-based fees, primarily in our liquid alternative strategies.
The following table presents a reconciliation of Net income (controlling interest) to Adjusted EBITDA (controlling interest): 27 Tab l e of Contents For the Years Ended December 31, (in millions) 2020 2021 2022 Net income (controlling interest) $ 202.2 $ 565.7 $ 1,145.9 Interest expense 92.3 111.4 114.4 Income taxes 69.5 229.6 347.4 Intangible amortization and impairments (1) 427.7 199.9 195.0 BPEA Transaction (2) — — (743.6) Other items (3) 7.1 (48.0) 1.2 Adjusted EBITDA (controlling interest) $ 798.8 $ 1,058.6 $ 1,060.3 __________________________ (1) Intangible amortization and impairments in our Consolidated Statements of Income include amortization attributable to the non-controlling interests of our consolidated Affiliates.
The following table presents a reconciliation of Net income (controlling interest) to Adjusted EBITDA (controlling interest): For the Years Ended December 31, (in millions) 2021 2022 2023 Net income (controlling interest) $ 565.7 $ 1,145.9 $ 672.9 Interest expense 111.4 114.4 123.8 Income taxes 229.6 347.4 185.2 Intangible amortization and impairments (1) 199.9 195.0 128.5 Affiliate Transactions (2) — (743.6) (162.7) Other items (3) (61.0) (5.3) (12.0) Adjusted EBITDA (controlling interest) $ 1,045.6 $ 1,053.8 $ 935.7 ___________________________ (1) Intangible amortization and impairments in our Consolidated Statements of Income include amortization attributable to the non-controlling interests of our consolidated Affiliates.
For the year ended December 31, 2022, we repurchased 4.5 million shares of our common stock at an average price per share of $144.45.
For the year ended December 31, 2023, we repurchased 3.0 million shares of our common stock at an average price per share of $132.99.
This equity distribution program superseded and replaced our prior equity distribution program. As of December 31, 2022, no sales had occurred under the equity distribution program. Derivatives See Note 7 of our Consolidated Financial Statements. 32 Tab l e of Contents Commitments See Note 8 of our Consolidated Financial Statements.
This equity distribution program superseded and replaced our prior equity distribution program. As of December 31, 2023, no sales had occurred under the equity distribution program. Commitments See Note 7 of our Consolidated Financial Statements. Other Contingent Commitments See Notes 4 and 7 of our Consolidated Financial Statements.
Performance-based fees are generally billed less frequently than asset-based fees, and although performance-based fees inherently depend on investment performance and will vary from period to period, we anticipate performance-based fees will be a recurring component of our aggregate fees; however, we do not anticipate these fees to be a significant component of our Consolidated revenue as these fees are predominantly earned by our Affiliates accounted for under the equity method.
We anticipate performance-based fees will be a recurring component of our aggregate fees; however we do not anticipate these fees to be a significant component of our Consolidated revenue as these fees are predominately earned by our Affiliates accounted for under the equity method.
Equities Multi-Asset & Fixed Income Total December 31, 2021 $ 238.2 $ 277.5 $ 170.7 $ 127.4 $ 813.8 Client cash inflows and commitments 40.4 20.3 23.9 22.7 107.3 Client cash outflows (21.5) (59.9) (33.6) (25.3) (140.3) Net client cash flows 18.9 (39.6) (9.7) (2.6) (33.0) New investments 3.3 — — — 3.3 BPEA (1) (31.6) — — — (31.6) Market changes 2.6 (43.3) (26.0) (12.4) (79.1) Foreign exchange (2) (4.2) (8.1) (1.5) (1.5) (15.3) Realizations and distributions (net) (9.8) (0.3) (0.2) (0.2) (10.5) Other (3) 3.5 (0.1) (0.0 ) (0.2) 3.2 December 31, 2022 $ 220.9 $ 186.1 $ 133.3 $ 110.5 $ 650.8 __________________________ (1) Assets under management attributable to BPEA as of the BPEA Transaction closing date.
Equities Multi-Asset & Fixed Income Total December 31, 2022 $ 220.9 $ 186.1 $ 133.3 $ 110.5 $ 650.8 Client cash inflows and commitments 32.4 19.7 18.0 19.6 89.7 Client cash outflows (23.1) (46.0) (30.9) (18.9) (118.9) Net client cash flows 9.3 (26.3) (12.9) 0.7 (29.2) New investments 8.1 — — — 8.1 Veritable (1) (0.2) — — (17.6) (17.8) Market changes 8.7 25.0 22.5 10.8 67.0 Foreign exchange (2) 2.1 2.4 0.5 0.3 5.3 Realizations and distributions (net) (7.3) (0.3) (0.7) (0.3) (8.6) Other (3) (2.8) (0.3) 0.1 0.1 (2.9) December 31, 2023 $ 238.8 $ 186.6 $ 142.8 $ 104.5 $ 672.7 ___________________________ (1) Assets under management attributable to Veritable as of the closing date.
Equity Method Investments in Affiliates We periodically perform assessments to determine if the fair value of an investment may have declined below its related carrying value for our Affiliates accounted for under the equity method for a period that we consider to be other-than-temporary.
For the year ended December 31, 2023, we completed our annual assessment and only a significant decline in the fair values of these assets would result in an impairment. 36 Table of Contents Equity Method Investments in Affiliates We periodically perform assessments to determine if the fair value of an investment may have declined below its related carrying value for our Affiliates accounted for under the equity method for a period that we consider to be other-than-temporary.
As of December 31, 2022, approximately 27% of our total assets under management could potentially earn performance-based fees. These percentages were approximately 12% and 48% of our assets under management for our consolidated Affiliates and Affiliates accounted for under the equity method, respectively.
These percentages were approximately 12% and 48% of our assets under management for our consolidated Affiliates and Affiliates accounted for under the equity method, respectively.
The decrease in asset-based fees was due to a decrease in average assets under management, primarily in our global equity strategies driven by equity markets, offset by new Affiliate investments in the fourth quarter of 2021 and changes in the composition of our assets under management.
The decrease in asset-based fees was principally due to a decrease in our average assets under management, primarily in our global equity strategies, and the impact of the BPEA Transaction. These decreases were partially offset by changes in the composition of our assets under management.
(4) Other economic items include certain gains and losses, principally related to the accounting for contingent payment obligations as well as general partner and seed capital investments, tax windfalls and shortfalls from share-based compensation, certain Affiliate equity expenses, and non-cash imputed interest.
(4) Other economic items include gains and losses related to contingent payment obligations, tax windfalls and shortfalls from share-based compensation, certain Affiliate equity activity, unrealized gains and losses on seed capital, general partner commitments, and other strategic investments, and realized economic gains and losses related to these seed capital, general partner commitments, and other strategic investments.
We believe that many investors use this measure when assessing the financial performance of companies in the investment management industry. This non-GAAP performance measure is provided in addition to, but not as a substitute for, Net income (controlling interest) or other GAAP performance measures.
This non-GAAP performance measure is provided in addition to, but not as a substitute for, Net income (controlling interest) or other GAAP performance measures.
The following charts present information regarding the composition of our assets under management by client type as of December 31, 2021 and 2022: Assets Under Management by Client Type The following table presents changes in our assets under management by client type: 21 Tab l e of Contents (in billions) Institutional Retail High Net Worth Total December 31, 2021 $ 413.8 $ 252.5 $ 147.5 $ 813.8 Client cash inflows and commitments 43.3 39.6 24.4 107.3 Client cash outflows (55.9) (58.0) (26.4) (140.3) Net client cash flows (12.6) (18.4) (2.0) (33.0) New investments 3.3 — — 3.3 BPEA (1) (31.6) — — (31.6) Market changes (27.1) (35.3) (16.7) (79.1) Foreign exchange (2) (7.8) (6.6) (0.9) (15.3) Realizations and distributions (net) (9.1) (0.9) (0.5) (10.5) Other (3) 4.6 (2.4) 1.0 3.2 December 31, 2022 $ 333.5 $ 188.9 $ 128.4 $ 650.8 __________________________ (1) Assets under management attributable to BPEA as of the BPEA Transaction closing date.
The following charts present information regarding the composition of our assets under management by client type as of December 31, 2022 and 2023: Assets Under Management by Client Type The following table presents changes in our assets under management by client type: 24 Table of Contents (in billions) Institutional Retail High Net Worth Total December 31, 2022 $ 333.5 $ 188.9 $ 128.4 $ 650.8 Client cash inflows and commitments 38.5 31.5 19.7 89.7 Client cash outflows (50.2) (47.7) (21.0) (118.9) Net client cash flows (11.7) (16.2) (1.3) (29.2) New investments 7.9 — 0.2 8.1 Veritable (1) (0.2) — (17.6) (17.8) Market changes 28.0 25.5 13.5 67.0 Foreign exchange (2) 3.0 1.9 0.4 5.3 Realizations and distributions (net) (6.0) (2.4) (0.2) (8.6) Other (3) 0.4 (1.7) (1.6) (2.9) December 31, 2023 $ 354.9 $ 196.0 $ 121.8 $ 672.7 ___________________________ (1) Assets under management attributable to Veritable as of the closing date.
In 2022, we met our cash requirements primarily through cash generated by operating activities and proceeds from the BPEA Transaction. Between January 1, 2023 and February 15, 2023, we have sold $196.0 million of EQT ordinary shares.
In 2023, we met our cash requirements primarily through cash generated by operating activities, proceeds from the Veritable Transaction, and proceeds from the sale of our remaining ordinary shares of EQT.
When we test our equity method investments for impairment, we make assumptions about growth rates of projected assets under management, client attrition, asset- and performance-based fees, and expenses. In these analyses, we also make judgments about tax benefits, tax rates, and discount rates.
When we quantitatively test our equity method investments for impairment, we typically use valuation methods such as discounted cash flow analyses. In these analyses, our most significant assumptions relate to growth rates of projected assets under management, client attrition, asset- and performance-based fees, expenses, and discount rates.
Consolidated revenue is generally determined by the level of our consolidated Affiliate average assets under management and the composition of these assets across our strategies with different asset-based fee ratios and performance-based fees.
For these Affiliates, we typically use structured partnership interests in which we contractually share in the Affiliate’s revenue without regard to expenses. Consolidated revenue is generally determined by the level of our consolidated Affiliates’ average assets under management and the composition of these assets across our consolidated Affiliates’ investment strategies with different asset-based fee ratios and performance-based fees.
We anticipate that our current cash balance, cash flows from operations, proceeds from sales of our marketable securities, and borrowings under our senior unsecured multicurrency revolving credit facility (the “revolver”) will be sufficient to support our uses of cash for the foreseeable future. 29 Tab l e of Contents In addition, we may draw funding from the debt and equity capital markets, and our credit ratings, among other factors, allow us to access these sources of funding on favorable terms.
We anticipate that our current cash balance, cash flows from operations, proceeds from sales of our marketable securities, and borrowings under our senior unsecured multicurrency revolving credit facility (the “revolver”) will be sufficient to support our uses of cash for the foreseeable future.
Net Income The following table presents Net income, Net income (controlling interest) and Net income (non-controlling interest): For the Years Ended December 31, (in millions) 2020 2021 % Change 2022 % Change Net income $ 427.0 $ 890.1 N.M.
Net Income The following table presents Net income, Net income (controlling interest) and Net income (non-controlling interest): For the Years Ended December 31, (in millions) 2021 2022 % Change 2023 % Change Net income $ 890.1 $ 1,388.1 56 % $ 906.1 (35) % Net income (non-controlling interests) 324.4 242.2 (25) % 233.2 (4) % Net income (controlling interest) 565.7 1,145.9 N.M.
See Note 10 of our Consolidated Financial Statements. BPEA Transaction Gain For the year ended December 31, 2022, we recorded a $641.9 million gain on the BPEA Transaction. See Note 10 of our Consolidated Financial Statements.
Affiliate Transaction gains For the years ended December 31, 2022, and 2023, we recorded gains of $641.9 million on the BPEA Transaction and $133.1 million on the Veritable Transaction, respectively. See Notes 8 and 9 of our Consolidated Financial Statements.
For a majority of these Affiliates, we use structured partnership interests in which we contractually share in the Affiliate’s revenue less agreed-upon expenses. We also use structured partnership interests in which we contractually share in the Affiliate’s revenue without regard to expenses.
For certain of our Affiliates accounted for under the equity method, we report the Affiliate’s financial results in our Consolidated Financial Statements one quarter in arrears. For a majority of these Affiliates, we use structured partnership interests in which we contractually share in the Affiliate’s revenue less agreed-upon expenses.
The following table presents equity method Affiliate average assets under management and equity method revenue, as well as equity method earnings, equity method intangible amortization, and equity method intangible impairments, which in aggregate form Equity method income (loss) (net): 25 Tab l e of Contents For the Years Ended December 31, (in millions, except as noted) 2020 2021 % Change 2022 % Change Operating Performance Measures Equity method Affiliate average assets under management (in billions) $ 301.8 $ 315.9 5 % $ 287.2 (9) % Equity method revenue $ 2,598.9 $ 3,199.0 23 % $ 3,230.9 1 % Financial Performance Measures Equity method earnings $ 288.6 $ 417.5 45 % $ 497.2 19 % Equity method intangible amortization (147.0) (123.0) (16) % (109.1) (11) % Equity method intangible impairments (185.0) (52.0) (72) % (50.0) (4) % Equity method income (loss) (net) $ (43.4) $ 242.5 N.M.
The following table presents equity method Affiliate average assets under management and equity method revenue, as well as equity method earnings, equity method intangible amortization, and equity method intangible impairments, which in aggregate form Equity method income (net): For the Years Ended December 31, (in millions, except as noted) 2021 2022 % Change 2023 % Change Operating Performance Measures Equity method Affiliate average assets under management (in billions) $ 315.9 $ 287.2 (9) % $ 266.6 (7) % Equity method revenue $ 3,199.0 $ 3,230.9 1 % $ 3,008.8 (7) % Financial Performance Measures Equity method earnings $ 417.5 $ 497.2 19 % $ 375.6 (24) % Equity method intangible amortization (123.0) (109.1) (11) % (86.0) (21) % Equity method intangible impairments (52.0) (50.0) (4) % (9.6) (81) % Equity method income (net) $ 242.5 $ 338.1 39 % $ 280.0 (17) % Our equity method revenue decreased $222.1 million or 7% in 2023, due to a $183.2 million or 6% decrease from asset-based fees and a $38.9 million or 1% decrease from performance-based fees, primarily in our liquid alternative strategies.
Interest expense increased $3.0 million or 3% in 2022, primarily due to a $4.7 million increase due to higher interest rates on our senior unsecured term loan facility (the “term loan”) and a $4.5 million increase from our debt securities issued in 2021.
There were no significant changes in Intangible amortization and impairments in 2023. Interest expense increased $9.4 million or 8% in 2023, primarily due to a $12.1 million increase resulting from higher interest rates on our senior unsecured term loan facility (the “term loan”).
These increases were partially offset by a $5.5 million decrease from our junior convertible debt securities due to lower principal balance resulting from repurchases and lower accretion expense after the adoption of ASU 2020-06 in the first quarter of 2022. There were no significant changes in Depreciation and other amortization in 2022.
This increase was partially offset by a $2.9 million decrease resulting from repurchases of our junior convertible securities in the first half of 2022. There were no significant changes in Depreciation and other amortization in 2023.
For the year ended December 31, 2022, Cash flows from operating activities were $1,054.7 million, primarily from Net income of $1,388.1 million adjusted for non-cash items of $852.5 million, $393.5 million of distributions of earnings received from equity method investments, and timing differences in the cash settlement of receivables, other assets, and payables, accrued liabilities, and other liabilities of $138.5 million.
For the year ended December 31, 2023, Cash flows from operating activities were $874.3 million, primarily from Net income of $906.1 million adjusted for $490.8 million of distributions of earnings received from equity method investments and non-cash items of $303.3 million.
Other Contingent Commitments See Notes 4 and 8 of our Consolidated Financial Statements. Leases As of December 31, 2022, our lease obligations were $40.4 million through 2023, $73.3 million from 2024 through 2025, $44.9 million from 2026 through 2027, and $85.9 million thereafter.
Leases As of December 31, 2023, our lease obligations were $40.0 million through 2024, $61.5 million from 2025 through 2026, $43.9 million from 2027 through 2028, and $68.3 million thereafter.
Financing Cash Flow For the year ended December 31, 2022, Cash flows used in financing activities were $1,402.9 million, primarily due to the return of $718.0 million of capital to shareholders, principally through share repurchases of our common stock, $341.9 million of distributions to non-controlling interests, $201.0 million of settlement of deferred payment obligations (net of $49.8 million contributed from a co-investor), $60.8 million of repurchases of our junior convertible securities, $50.5 million of other financing items, and $46.3 million of Affiliate equity purchases, net of issuances.
Financing Cash Flow For the year ended December 31, 2023, Cash flows used in financing activities were $758.3 million, primarily due to $341.9 million of repurchases of common stock (net), $271.3 million of distributions to non-controlling interests, $55.3 million of other financing items, and $54.0 million of Affiliate equity purchases, net of issuances.
The decrease in asset-based fees was due to a decrease in equity method Affiliate average assets under management, primarily in our global equity strategies driven by equity markets, offset by changes in the composition of our assets under management. Equity method earnings increased $79.7 million or 19% in 2022, while equity method revenue increased $31.9 million or 1%.
The decrease in asset-based fees was principally due to the impact of the BPEA Transaction, partially offset by changes in the composition of our assets under management. 28 Table of Contents Equity method earnings decreased $121.6 million or 24% in 2023, while equity method revenue decreased $222.1 million or 7%.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTo illustrate the effect of possible changes in foreign currency exchange rates, we estimate a 1% change in the pound sterling and Canadian dollar to U.S. dollar exchange rates would have resulted in a $9.2 million and $2.0 million change to stockholders’ equity, respectively, based on the December 31, 2022 carrying value of Affiliates whose functional currency is the pound sterling or the Canadian dollar, and of our and our Affiliates’ pound sterling-denominated derivative financial instruments.
Biggest changeTo illustrate the effect of possible changes in foreign currency exchange rates, we estimate a 1% change in the pound sterling, Canadian dollar, and Euro to U.S. dollar exchange rates would have resulted in a $8.0 million, $2.1 million, and $1.2 million change to stockholders’ equity, respectively, based on the December 31, 2023 carrying value of Affiliates whose functional currency is the pound sterling, Canadian dollar, or the Euro, and of our and our Affiliates’ pound sterling- and Euro-denominated derivative financial instruments.
Certain of our Affiliates have the pound sterling or the Canadian dollar as their functional currency, and are, therefore, impacted by movements in pound sterling and Canadian dollar to U.S. dollar foreign currency exchange rates.
Certain of our Affiliates have the pound sterling, Canadian dollar, or the Euro as their functional currency, and are, therefore, impacted by movements in pound sterling, Canadian dollar, and Euro to U.S. dollar foreign currency exchange rates.
We estimate that a 1% change in interest rates would have changed our annual interest expense on the outstanding balances under our credit facilities by $3.5 million, as of December 31, 2022. Foreign Currency Risk The functional currency of most of our Affiliates is the U.S. dollar.
We estimate that a 1% change in interest rates would have changed our annual interest expense on the outstanding balances under our credit facilities by $3.5 million, as of December 31, 2023. Foreign Currency Risk The functional currency of most of our Affiliates is the U.S. dollar.
As of December 31, 2022, the interest rate for our outstanding borrowings under the term loan was term-SOFR plus a SOFR adjustment of 0.10%, plus the marginal rate of 0.85%.
As of December 31, 2023, the interest rate for our outstanding borrowings under the term loan was term-SOFR plus a SOFR adjustment of 0.10%, plus the marginal rate of 0.85%.
We pay a variable rate of interest on our credit facilities at specified rates, based either on an applicable term-SOFR plus a SOFR adjustment of 0.10% or prime rate, plus a marginal rate determined based on our credit rating.
We pay a variable rate of interest on our credit facilities at specified rates, based either on an applicable term Secured Overnight Financing Rate (“SOFR”) plus a SOFR adjustment of 0.10% or prime rate, plus a marginal rate determined based on our credit rating.
Such values are affected by changes in financial markets (including declines in the capital markets, fluctuations in foreign currency exchange rates, inflation rates or the yield 35 Tab l e of Contents curve, and other market factors) and, accordingly, declines in the financial markets may negatively impact our Consolidated revenue and equity method revenue.
Such values are affected by changes in financial markets (including declines in the capital markets, fluctuations in foreign currency exchange rates, inflation rates or the yield curve, and other market factors) and, accordingly, declines in the financial markets may negatively impact our Consolidated revenue and equity method revenue.
There can be no assurance that our or our Affiliates’ derivative financial instruments will meet their overall objective or that we or our Affiliates will be successful in entering into such instruments in the future. 36 Tab l e of Contents
There can be no assurance that our or our Affiliates’ derivative financial instruments will meet their overall objective or that we or our Affiliates will be successful in entering into such instruments in the future. 38 Table of Contents
As of December 31, 2022, we estimate a proportional 1% change in the value of our assets under management would have resulted in a $16.9 million annualized change in asset-based fees in Consolidated revenue for our consolidated Affiliates and a $13.5 million annualized change in asset-based fees in equity method revenue for our Affiliates accounted for under the equity method.
As of December 31, 2023, we estimate a proportional 1% change in the value of our assets under management would have resulted in a $16.3 million annualized change in asset-based fees in Consolidated revenue for our consolidated Affiliates and a $14.8 million annualized change in asset-based fees in equity method revenue for our Affiliates accounted for under the equity method.
We estimate that a 1% change in interest rates would have resulted in a $112.8 million net change in the fair value of our fixed rate securities as of December 31, 2022.
We estimate that a 1% change in interest rates would have resulted in a $145.7 million net change in the fair value of our fixed rate securities as of December 31, 2023.
For the year ended December 31, 2022, we estimate a 1% change in the pound sterling and the Canadian dollar to U.S. dollar exchange rates would have resulted in $1.1 million and $0.0 million in annual changes to Income before income taxes (controlling interest), respectively.
For the year ended December 31, 2023, we estimate a 1% change in the pound 37 Table of Contents sterling, Canadian dollar, and the Euro to U.S. dollar exchange rates would have resulted in $1.2 million, $0.3 million, and $0.0 million in annual changes to Income before income taxes (controlling interest), respectively.
Removed
We are exposed to fluctuations in the Swedish krona as it relates to our EQT ordinary shares. As of December 31, 2022, we estimate a 1% change in the Swedish krona to U.S dollar exchange rate would result in a $4.3 million change to Income before income taxes (controlling interest).

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